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2019SANGETSU REPORT
www.sangetsu.co.jp
General Affairs Department, Public & Investor Relations SectionCSR Promotion Section CSR Promotion Section1-4-1 Habashita, Nishi-ku, Nagoya City,Aichi 451-8575, Japan
Sangetsu Corporation
Corporate Philosophy
Integrity
Company Creed
Brand Concept
To contribute to societythrough interior
design and strive tocreate a daily culture
of enrichment.
Corporate Mission Three Principles of Sangetsu
Creative DesignsHighly Reliable QualityFair Market Prices
Brand Statement
We provide the joy of design to those
who create new spaces.
We share the joy of design with those who create new spaces.
The joy of ful�lling your dream at home.
The joy of envisioning and realizing unconventional commercial
spaces and facilities.
In our role of bringing that joy, we ourselves must contemplate
the nature of design.
The design that we pursue encompasses not only the design of
objects, such as the aesthetics and functions of the products
themselves, but the design of spaces that set the context for
the thinking and activities of people within those spaces.
With these two design perspectives, we will continue to propose
creating spaces that include a total design for the interior.
Furthermore, in our efforts to realize such designs, we will value
our collaboration with outside partners in addition to expanding
the foundation of our business and making our operations
more sophisticated.
Sangetsu, together with the creators, users and others related to
interior products, will share the joy of creating new value.
Contents
Lead Story
02 Our Story
Top Message
Growth Strategies
12 Sangetsu Group Businesses
14 Unique Business Model
16 Sangetsu’s Strengths
18 Value Creation at Sangetsu
20 Special Feature 1 Global Strategy
22 Special Feature 2 Logistics Revolution
Business Overview
24 Interior Segment
28 Exterior Business Segment
29 Overseas Business Segment
ESG at Sangetu
30 CSR at Sangetsu
32 Dialog between Institutional Investors and Audit Committee Members
34 Corporate Governance
38 Board of Directors
40 Compliance
41 Risk Management
42 Human Rights—Diverse Work Styles
44 Together with Customers and Suppliers
46 Social Contribution Activities
48 Safeguarding the Global Environment
Company Information
50 Non-�nancial Highlights (Sangetsu Corporation only)
51 ESG Data (Sangetsu Corporation only)
52 Financial Highlights
53 Capital Policy
54 Ten-Year Consolidated Financial Summary
56 Corporate Pro�le/Stock Information
57 Sangetsu Showrooms/Editorial Policy
Brand Purpose
P02
P04
P12
P24
P30
P50
2019SANGETSU REPORT
Corporate Philosophy
A timeless and unchanging Sangetsu original spirits, “Company Creed”,
“Corporate Mission”, “the Three Principles of Sangetsu,”
and our Brand Concept constitute Sangetsu’s corporate philosophy.
01SANGETSU REPORT 2019
Wallcoverings
FlooringMaterials
Fabrics
¥160.42 billion¥35.7 billion
Net sales(record high)
Pro�t attributableto owners of parent
FY2018
NurturedSangetsu DNA
Company History
ExteriorBusiness
OverseasBusiness
1849(Kaei 2)
1953 1960 1970 1980 2000 2010 201920141990
Our history extends back to Sangetsudo, a picture framing business started by our found-er, Yasuke Hibi, in 1849. Also dealing in the so-called Japanese interior items, including scrolls, hanging shafts, fusuma (papered sliding doors), and folding screens, it was a certainly a business that was ahead of the times.
Early Years
Early Years (1849 to 1952)
In 2014, Shosuke Yasuda, who took over management from Yuichi Hibi, is appointed President and Representative Director. As a listed company that has shifted from a founder’s family-centered man-agement to having employees in charge, we are still facing the challenges of a variety of innovations.
Period of Innovation (from 2014)
Rapid Growth and Stability Period Period of Innovation
The signature of Yasuke Hibi on the back of a painting of the Buddha in Nirvana, dated 1849.
Establishes Sangetsudo Shoten Co., Ltd. in 1953 and commences wallpaper sales in 1956. The Company’s new of�ce building is completed in 1970. From around this time, achieves dramatic growth on the back of Japan’s economic growth.
Rapid Growth and Stability Period (1953 to 2013)
■ 1849 Sangetsudo founded by Yasuke Hibi
■ 1953 Sangetsudo Shoten Co., Ltd. established
■ 1966 Company name changed from Sangetsudo Shoten Co., Ltd. to Sangetsudo Co., Ltd.
■ 1960 Establishes Company Creed: Integrity
■ 1956 Starts wallcovering sales
■ 1979 Releases �rst PVC �oor sheet sample book
■ 1982 Releases �rst carpet sample book
■ 1986 Releases �rst �oor tile sample book
■ 1988 Releases �rst carpet tile sample book
■ 1981 Releases �rst curtain sample book
■ 1994 Releases �rst upholstery sample book
■ 2000 Launches Sangetsu Curtain ECO Project curtain recycling system
■ 2005 Makes Sungreen Co., Ltd. a subsidiary
■ 2016 Establishes Chinese subsidiary Sangetsu (Shanghai) Corporation Acquires U.S. company Koroseal Interior Products Holdings, Inc.
■ 1960 Releases �rst wallcovering sample book
■ 1965 Launches “Elite,” �rst original wallpaper
■ 1991 Releases �rst glass �lm sample book
■ 1995 Launches “REATEC” self-adhesive decorative �lm
■ 1970 Company renamed Sangetsu Co., Ltd. New of�ce building completed Corporate identity (CI) created
■ 1975 Establishes Three Principles of Sangetsu
■ 2003 50th anniversary of company founding
■ 2014 Shosuke Yasuda assumes presidency Announces Medium-Term Business Plan (2014–2016) "Next Stage Plan G" ■ 2016
Announces new “Joy of Design” brand concept
■ 2017 Announces Medium-Term Business Plan "PLG 2019"
New Brand Concept
Inte
rior
Bus
ines
s
2014
Sh
ifts
to
Bu
sin
ess
Div
isio
n S
yste
m
Net sales exceed ¥10 billion
1976
1991
Net sales reach ¥100 billion
(Note) Lighting Business transferred in April 2019
1980 Company listed on Second Section of Nagoya Stock Exchange
■ 2017 Acquires Singapore-based Goodrich Global Holdings Pte., Ltd.
■ 2017 Brand debut of curtain sales company Sangetsu Vosne Corporation
1996Company listed on First Section of Tokyo Stock Exchange
Our Story
Sangetsu’s history runs hand in hand with the development of the Japanese construction and
interior industries.
More than 170 years have passed since Yasuke Hibi founded Sangetsudo. In the Edo period,
he had started a picture framing business on the south side of Nagoya Castle’s Habashita Gate.
Amid the rapid growth of housing-related industries in Japan, we have been constantly enhancing
our product development, sales and distribution systems, while contributing to the development
of the interior industry.
In 2014, a president was appointed from outside the founder’s family for the first time,
and a management system in which “employees play a leading role” launched.
Sangetsu is currently continuing to face challenges toward becoming “Global Sangetsu.”
Advancing together with the Japanese interior industry, facing challenges of new stages toward becoming global Sangetsu L
ea
d S
tory
02 03SANGETSU REPORT 2019 SANGETSU REPORT 2019
Lead Story
We will strengthen our
business foundation
with an eye on the future
and aim for sustainable
growth.
Top Message
President, CEO
Shosuke Yasuda
I would first like to provide a fiscal 2018 overview of the domestic construction market, which is closely
connected to the company’s business. Underpinned by factors that include the redevelopment of the
Tokyo metropolitan area and the establishment of infrastructure for the 2020 Tokyo Olympics and
Paralympics, the non-residential sector saw firm demand, including for new facilities and renovations,
such as for accommodation facilities and offices as well as commercial facilities. In contrast, in the res-
idential sector, although owned houses and residential houses for sale showed signs of recovery, rental
housing declined, and new housing construction remained almost on par with the previous fiscal year.
Under these circumstances, the Group has been steadily implementing growth strategies based
on its Medium-Term Business Plan (2017-2019) “PLG 2019.” In particular, as initiatives to enhance
functionality we promoted a wide range of measures, including reviews of sales systems, the estab-
lishment of a Renovation Division and the development of new business by each subsidiary, geograph-
ic expansion by overseas subsidiaries, collaboration with overseas manufacturers, and the operation of
a new core system. At the same time, as measures to address the continuing rises in materials, labor,
and logistics costs, we reviewed product prices and advanced the improvement of our own delivery
networks.
As a result of these initiatives and measures, consolidated net sales for the term increased 2.6%
year on year to ¥160,422 million, a record high and the ninth consecutive increase. Operating income
rose 17.1% year on year to ¥5,895 million, and ordinary income increased 17.6% to ¥6,699 million,
while profit attributable to owners of parent fell 20.7% to ¥3,579 million due to the impairment of in-
tangible assets related to Koroseal Interior Products Holdings, Inc., a U.S. subsidiary of the company.
To summarize fiscal 2018, the year was positioned as one in which we could successfully achieve
efforts toward the restructuring of our business foundation as our unique strength and gain the under-
standing of our customers for those efforts while conducting product price reviews. At the same time,
however, it is thought that the aging of the workforces in the construction and logistics industries and
the increasingly severe labor shortages will deepen, and we regard this as a major issue for the Group.
Looking Back at Fiscal 2018
Progress on Medium-Term Business Plan (2017–2019) “PLG 2019”
Billions of yen
ROE (%)
Net sales
Net assets
CCC* (Days)
4.2
¥156.3
4.51
105.2
83.8
FY2017
3.5
¥160.4
3.57
991.0
76.0
FY2018
—
¥163.0
5.7
—
—
FY2019Forecasts
8–10
¥165.0–175.0
8.0–10.0
105.0–100.0
75–60
Targets of PLG 2019
6.0
¥135.6
6.57
110.3
88.3
FY2016
Term of PLG 2019
Pro�t attributable to owners of parent
*CCC: Cash Conversion Cycle
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04 05SANGETSU REPORT 2019 SANGETSU REPORT 2019
I am getting a sense from feedback that, at Sangetsu in fiscal 2018, we were able to consolidate the
basis for improving earnings as a result of the introduction of the new core system (please refer to
page 7), the reconstruction of the logistics networks that accompanied the new core system’s intro-
duction, and across-the-board price revisions. To help readers to more properly understand the signifi-
cance of these moves, I would like to talk about our unique business model.
A company that has been expanding the scope of its business beyond wallpaper sales, Sangetsu
has a long history of growing hand in hand with the Japanese interior industry. At the present time,
amid the progress being made in overseas business, there are many factors and features that are
drawing attention to the peculiarities of the Japanese interior industry.
The first factor is the high rate of wallpaper usage in Japanese homes. Wallpaper is used in more
than 90% of homes, practically all, and in Japan even types of wallpaper not seen elsewhere are mass
produced and distributed at low prices. There is also pride that Sangetsu alone created such a huge
market.
Another feature is the speed of delivery. In today’s Japanese interior industry, it has become a
matter of course for products to be delivered the day after they were ordered. Certainly, since it has
become necessary to respond flexibly to both delays in construction schedules and changes immedi-
ately before construction, “just-in-time” deliveries in accordance with the timing of construction are
required.
Furthermore, our products are adopted by people in various positions associated with construc-
tion, such as owners, architects, housing manufacturers, builders, and contractors. The fact that the
product decision-makers are so widely distributed in this way can also be said to be a peculiarity of this
industry.
Peculiarities of the Japanese Interior Industry
Within this unique domestic business environment, Sangetsu has been refining its sales and logistics
structures as well as the attractiveness of the products themselves.
In the case of our sales structures, we are making sales approaches to all levels of customers who
select our products. While based on area sales closely connected to a local region, we have in place a
Non-residential Business Department, which specializes in the non-residential market, and a Residen-
tial Business Department that specializes in the residential market, such as major housing manufactur-
ers and developers. We also have an organization that specializes in specific products, such as films
and upholstery. In terms of sales structures, the existence of an Interior Design Section that proposes
designs for showrooms and spaces throughout the country also plays a very important role. (For more
details, please refer to page 15.)
At the same time, with regard to our logistics structure, we have a total of about 12,000 products
for the domestic market, including about 4,300 wallpapers, about 2,600 flooring materials, and about
3,800 curtains. Even with this huge number of products being stocked at logistics hubs throughout the
country and receiving an average of around 60,000 orders on a daily basis, we continue to deliver
products “just in time”.
Our logistics bases in Japan cover the collection, processing and shipping functions. In the pro-
cessing function, we cut products to the sizes required by the orders and then pack them, thereby re-
ducing to the minimum the time needed for the sorting sequence. Particularly in recent years, the
introduction of new systems and the consolidation of logistics hubs have enabled further streamlining.
(For more details, please refer to page 22.)
Sales systems covering such a wide range of customers and the meticulous quick delivery service
are not something that could be achieved overnight, but we are proud of our business model with its
high barriers to entry.
Business Model with High Barriers to Entry
Overall Picture of New Core System to Realize “Just in Time” Linkage of information
Issue data for order from distributorsto “Sales Core” system
Uni�ed management ofproduct information Information linkage function
Customers/Activity managementBetween Sangetsu and
Suppliers•Customers
Sales Promotion UnitOnline order received Comprehensive Products
dadabaseSales Support
EDI
Shipping instruction•Sewing instruction, Intermediary order
Order inquiry, etc.
Receiving order / Placing order
Sales Core
General Administration
Logistics
eBASE Salesforce
Interior Business Unit Sales Business Unit
Bulk Orders
Inventory Allowance
In-warehouseProcessing
Accounting
Immediate Shipping
Connect with peripheral systemThe backbone of the new system
Core Key System
SAP
From receipt to shipment, to inventory control Operate more precisely
Logistic•Delivery
WMS
ConcurExpense calculation
HR•Payroll management Company Continue existing systems such as employee information, time and attendance management, personnel evaluation, etc.
Expense calculation system
Top Message
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06 07SANGETSU REPORT 2019 SANGETSU REPORT 2019
Next, I will talk about the attractiveness of the products themselves. A fabless company that does not
possess any manufacturing functions, Sangetsu has continually created Sangetsu brand products with
a host of manufacturers.
In addition to our own designs, we are developing products that are based on design and function
proposals from many domestic and foreign manufacturers with high product development capabilities
and that make use of opinions from, for example, designers, architectural design offices, and interior
contractors. While actively visiting trade fairs outside Japan and researching global trends, Sangetsu
staff members involved in product development undertake repeated trial-and-error analyses with man-
ufacturers as they focus on the development of products that meet the needs of customers and the
sample books that record those needs.
The sample books created in this way further strengthen Sangetsu’s brand power and, by expand-
ing sales volume, the expectations and confidence levels from manufacturers are further raised, creat-
ing a virtuous circle that leads to better product proposals. From the viewpoint of expanding sales
volume, the sales structure and logistics functions as well as the attractiveness of the products them-
selves are closely linked.
Strengths Unique to Fabless Companies
From now on, Sangetsu’s growth strategy will be focused on expanding its overseas markets. Since
2016, three overseas subsidiaries—one newly established in China, and two acquired (in North America
and Singapore)—have been brought under the Sangetsu umbrella, but I think it will take a little more
time for these companies to produce full-fledged results. There are also issues specific to each compa-
ny, but in addition to strengthening the management and sales systems—and enhancing the functions
of Koroseal Interior Products Holdings, Inc., which carries out manufacturing—our basic policy is to in-
troduce Sangetsu’s business model to overseas subsidiaries. On the other hand, as suppliers, overseas
manufacturers are highly capable of proposing designs, are extreamely cost competitive and will pursue
a procurement strategy and a sales strategy to both “make in the world and sell to the world.” (For more
details, please refer to page 20.)
In our Medium-Term Business Plan “PLG 2019”, the abbreviation stands for “Personal, Local,
Global.” This is not something we saw and thought about in the domestic market, but the more we
came to know the overseas market the more we felt that it had a lot in common with Japan. After all,
it was the power of the individual that was important,
and I felt that the connection between people was ex-
tremely important.
First of all, I firmly believe that Sangetsu can only
become a true global company by building a firm pres-
ence in each market and by making its strong presence
felt in each country. In other words, I think that strength-
ening the P (Personal, human resources) in each region
and thereby raising our L (Local) presence should be
followed by the G (Global).
Global meetingSample books listing each type of product
One aspect of product development
Original sample books for overseas markets
Overseas Business to Increase in Importance
Russia950 million m2
Europe520 million m2
Middle East80 million m2
Asia, excluding Japan and China530 million m2
Japan670 million m2
Oceania50 million m2
Africa30 million m2
China1,570 million m2 North America
110 million m2
Latin America80 million m2
Global Wallpaper Market Volume (Sangetsu estimates)
Top Message
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08 09SANGETSU REPORT 2019 SANGETSU REPORT 2019
Deeply involved in people’s living environments, our work in the interior industry plays an essential role,
so that, in a sense, we can be said to be an infrastructure industry. Now, though, the Japanese market
is facing a number of problems, including a decrease in the number of housing starts, aging craftsmen,
labor shortages, and a crisis in logistics.
I am concurrently serving as president of the Japan Wallcoverings Association, which is also rec-
ommending “the need to improve the profitability of the entire value chain.” From now on, the entire
industry will assist in solving social issues and creating new value, in the belief that we should aim for
coexistence and prosperity.
In order to do that, we have to change to work that involves more things that we can decide on
ourselves. It is a transformation from us
playing the “bit part” of simply selling to
becoming the main protagonist. Sangetsu
created the business practices of the cur-
rent Japanese interior industry, and we
recognize the creation of new markets as a
major mission imposed on us in the years
to come.
I was appointed president in 2014, when I was passed the baton of management from the founder.
Looking back over the past five years, I think the structure of the company, the role of the employees,
and the contents of their work have changed dramatically.
Formerly, there were a lot of simple, repetitive tasks at the company, such as the inputting of faxed
orders and the creation of coordination boards, but as far as possible we implemented business trans-
formations into more structured, negotiated, and creative work, for example by switching to business
process outsourcing (BPO).
Last year, concerns arose over the stable supply of
some products, so we postponed the distribution period
of our wallpaper sample book. At that time, all the em-
ployees shared their wisdom, combined their strengths,
and managed to overcome a difficult situation.
From now on, employees themselves will be respon-
sible for management and business, so I think we will
have to become a strong company so that they can be
the focal point of our internationalization and at the fore-
front of our overseas business development.
Sustainability of the Interior Industry
Strengthening of Human Resources
Keywords such as the U.N. Sustainable Development Goals (SDGs) and environmental, social and
governance (ESG) are attracting attention, but with regard to corporate governance what is important
is naturally a company’s system but also that each and every employee takes a firm stance. Naturally,
a company itself will not become strong if it commits illegal acts, nor if it carries out work that is not in
keeping with morals and business ethics. I believe that remaining in compliance is a major premise in
fulfilling our social responsibility.
We also carry out a range of activities as social contribution that make use of our main business.
Activities like supporting the renovation of children’s nursing homes actually represent a typical Sanget-
su approach and give the participating employees a greater awareness.
With regard to environmental issues, I feel there are still things we need to do, such as product
development that shows consideration for the environment and devising a system for recycling scrap
materials.
Amid the major changes that the business environment is undergoing, I think that the key to our
future growth is how to identify medium- and long-term risks and opportunities and how to contribute
to a sustainable society.
Sangetsu’s “Joy of Design” brand philosophy does not mean simply designing a product. The
philosophy encapsulates the joy of thinking about our own lives and experiencing the joy of creating
something new, together with the wish that the joy be shared by all employees.
I would like Sangetsu to continue to be an attractive company so that each and every employee
can contribute to society through his or her own work and ability.
CSR / ESG Initiatives
Sangetsu Net Sales and New Housing Construction
New Housing Construction
Sangetsu Net Sales (Non-consolidated)
20001995 2005 2010 2015 2018(FY)
190,000
170,000
150,000
130,000
110,000
90,000
70,000
50,000
30,000
10,000
1,700
1,500
1,300
1,100
900
700
500
300
100
Millions of yen (Thousands)
Cultivation ofProfessionals
Fully Commit toMerit-based
Approach
Promotion ofDiversity
Reform ofWorking Styles
Promotion ofHealth
Management
Human Resources:Points to
be Strengthened
Top Message
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10 11SANGETSU REPORT 2019 SANGETSU REPORT 2019
I want to experience the joy of creating something new and share that joy with all Sangetsu employees.
Growth Strategies
Net Sales by SegmentInterior Segment Sales by Business
FY2018Consolidated Net Sales
Wall-coverings
Sales Ratio 47.8%
Sales Ratio 74.5%
(down 1.1% year on year)
Sales
¥119,508 million
Sales Ratio 13.0%
(up 22.0% year on year)Sales ¥20,920 million
Sales Ratio 10.1%
(up 7.4% year on year)Sales ¥16,121 million
Interior Segment
Overseas Business Segment
Sales Ratio 2.6%
(up 15.4% year on year)Sales ¥4,227 million
Lighting Segment
Exterior Segment
¥160,422million
¥57,155 million
(down 0.8% year on year)
Flooringmaterials
Sales Ratio 36.1%
¥43,116 million
(up 0.6% year on year)
Fabrics
Sales Ratio 7.0%
¥8,311 million
(up 5.1% year on year)
Sangetsu Group Businesses
Founded in 1973, Sungreen Co., Ltd. joined the Group in
2005 as a trading company specializing in the exterior busi-
ness. The company seeks to enrich daily life by providing
products for gates, fences and carports as well as for public
facilities, such as schools and commercial facilities. Sun-
green is also expanding its lineup in response to growing
demand from the renovation market for products used in
designing garden spaces.
Sangetsu wallcoverings feature excellent design, durability and workability.
Our broad lineup naturally incorporates wallcoverings but also includes
“REATEC” self-adhesive decorative films and glass films. We respond to
market demand by developing market-driven products while also focusing
on the sales development of diverse and original digitally printed products.
From residential use, including houses and condominiums, to offices,
shops, medical and welfare facilities, and educational facilities, we develop
flooring materials that address the requirements of wide-ranging proper-
ties, such as new properties and renovations in the non-residential field. We
offer a rich variety of materials, such as fiber-based flooring for carpets and
carpet tiles, vinyl-based flooring for cushioned floor sheets and floor tiles,
and flooring made of natural materials.
We offer not only a widely varied product lineup in which we pay particular
attention to the designs and materials but also functional curtains that, for
example, provide heat insulation or are not see-through from outside. The
Fabrics Business also develops curtain sample books to meet needs that
include high-end products and our single-price products lineup. Specializing
in fabric products, Sangetsu Vosne offers an E-Commerce (EC) website for
end-users.
For upholstery, we develop sales in a number of fields, including
hotels, welfare and commercial facilities.
Having established Sangetsu (Shanghai) Corporation in
2016, acquired Koroseal Interior Products Holdings, Inc. in
the United States and then, in December 2017, Singa-
pore-based Goodrich Global Holdings Pte., Ltd., the Sanget-
su Group is developing its overseas business mainly along
the Pacific Rim area. Based on existing business models
tailored to the needs of each market, we will expand Sanget-
su’s unique business to overseas markets.
Proposing enriched daily life through exteriors
Diverse product lineups with excellent functionality and design
through market-driven product development
Responding to robust demand in the non-residential sector,
increasing handling of overseas products to develop new markets
Aiming for No. 1 share among curtain suppliers with sample books by
means of our nationwide showrooms and extensive sales channels
Expanding Sangetsu’s unique business to overseas
marketsFocusing on wallcoverings, flooring materials and fabrics for curtains and upholstery, which are used in people’s daily
lives for both residential and non-residential purposes, we are developing a wide range of businesses, from in-house
product planning and development to sales, orders and deliveries.
We are also continuing to expand geographically through our Overseas Business and pursue comprehensive and
strategic initiatives across the entire Group. Segment companies include Fairtone Co., Ltd., which is involved in the
construction and management primarily of offices, and Sangetsu Vosne Corporation, which is responsible for the
planning and sale of fabric products.
Interior Segment (Japan) Exterior Segment (Japan) Overseas Business Segment
Wallcoverings Business
Flooring Materials Business
Fabrics Business (Curtains and Upholstery)
Wallcoveringsmarket share
50%
about
Flooring materialsmarket shares
50%
30%
PVC �oor sheets 42%Printed PVC �oor tiles 50%Carpet tiles 27%
–
about
Order-made curtainsmarket share
23%
about
(Note) As of April 5, 2019, Sangetsu sold all of its stock in Yamada Shomei Lighting Co., Ltd. and withdrew from the lighting equipment business.
Gro
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12 13SANGETSU REPORT 2019 SANGETSU REPORT 2019
Growth Strategies
Unique Business Model
Sangetsu, a Fabless Company Sales structure geared toward multi-level customers/ a variety of customers
Specialized Market- and Product-Dimension Organizations and Area Sales System
A fabless company, Sangetsu possesses no manufacturing
capabilities of its own. We offer a variety of products to our
customers by jointly developing wallcoverings, flooring materi-
als and fabrics (curtains and upholstery) with several manufac-
turers and by means of Sangetsu brand sample books.
We pay particular attention to a variety of customer feed-
back and provide enhanced product lineups that drive market
needs. At the same time, we are meeting the needs of cus-
tomers related to construction and installation through ze-
ro-shortage stock management and a “just-in-time” logistics
system.
Sangetsu provides an extensive lineup of interior materials,
including wallcoverings, flooring materials, curtains and uphol-
stery. Most of them are installed by professional interior in-
stallers, but the people who choose the product and make the
decisions are very diverse.
The residential market includes detached housing, condo-
miniums and rental housing, and the non-residential market
covers offices, public and commercial facilities as well as
schools. In both of these markets, there are a large number of
players, and interior material products are ordered with a truly
diverse and multi-level decision-making process.
Sangetsu conducts direct sales approaches to a wide
range of customers, from the upstream to the downstream of
such building industries.
Basically, we provide various types of sample books and
assist owners, designers, space designers and interior coordi-
nators in turning the ideas they have in mind for spaces into
reality. Particularly in the non-residential market, we are imple-
menting proposal-based sales that flexibly respond to large-vol-
ume orders and special conditions.
Proposing sales of products to widely divergent markets re-
quires more specialized knowledge.
Although Sangetsu is based on area sales, there are spe-
cialized organizations, including the Non-residential Business
Department that specializes in, for example, medical facilities
and offices, and the Residential Business Department that
specializes in the housing market, such as the major housing
manufacturers. Each department supports its own customers.
We also have organizations that specialize in certain products,
such as upholstery and functional films. Combining market
areas and products centered on a region, a three-dimensional
(3D) system responds to the detailed needs being requested
by our customers.
Strengths of Fabless CompaniesFabless means no fabrication. In other words, Sangetsu’s main business activities are product development, planning and design as well as sales and
marketing. Usually, manufacturers invest in production equipment, but by deciding to go fabless, a company can focus on funding development and
marketing as a source of its competitiveness and thus quickly meet market needs without being tied to producer-driven solutions. At the same time,
as they possess the ability to create their own concepts as well as unique products and services, unlike retailers, fabless companies are also able to
carry out branding and conduct sales activities from a position like that of a manufacturer.
• As they do not have their own production facilities, fabless companies can invest in product development and marketing.
• Fabless companies can work on a variety of product development projects with manufacturers that pos-sess a range of strengths.
• Fabless companies can respond promptly to market needs without being tied to their own “seeds” (a company’s products and services.)
3D sales system structure:
Region / Market Area / Products
3D Sales Organization in Japan
Total of 58 departments
Residential Business Departm
ent
Non-residential Business Departm
ent
Medical facilitie
s
Welfare facilities
Offices
Restaurants /
commercial facilitie
s
Film Sales Department
Hokk
aido
Bra
nch
Toho
ku B
ranc
h
Toky
o Br
anch
Kita
-Kan
to B
ranc
h
Chub
u Br
anch
Kans
ai B
ranc
h
Chug
oku/
Shik
oku
Bran
ch
Kyus
hu B
ranc
h
Speci�
cation
activ
ities
Glass Film Section
Reatec Sections
Upholstery Business SectionProductDimension
RegionalDimension
MarketArea
Dimension
Specification activities and line sales
Specification activities
Salesdestinations
Extensivesales structureMultiple customers
(more than 100,000 companies)
•Of�ces•Hospitals•Schools•Commercial facilities, etc.
•Detached housing•Condominiums, etc.
Mu
lti-
leve
l cu
sto
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s
No
n-r
esid
enti
al M
arke
t
Interiorinstallationcompanies
Decision makers
Decision makers
Condomin-ium
developers
Housingmanufac-
turersRenovators
PrivateownersBuilders
Residential Market
■ Sales staff■ Showroom staff■ Coordinators
Sangetsu
Dealerships
Companyowners
Generalcontractors
Designcompanies
Professional interior installation companies
The Non-residential Business Department develops specialized sales in response to robust new construction/renovation demand in of�ces and hotels due to working style reform and inbound trends.
In the multi-type, small-lot residential market, such as condominiums, rental housing and detached housing, we deliver products to interior installation companies, mainly nationwide dealerships, which are said to number approximately 100,000 companies. In fabric products, we have also entered the EC business.
Possessing the ability to receive detailed sales orders from the large number of customers at more than 100,000 companies are our nationwide dealerships. We also provide customer support functions, from the gathering of customer information to the delivery function, and installation support.
Residential MarketCollaboration with Dealerships
Non-residential MarketDiagram Showing Sangetsu’s Relationships with the Interior Industry in Japan
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14 15SANGETSU REPORT 2019 SANGETSU REPORT 2019
Growth Strategies
Strong Brand Power
Deliver
Create
Propose
Due to our overwhelming share of the market and extensive deliv-ery track record in Japan, we have built such strong brand power that people say, “When it’s interiors, it has to be Sangetsu.” We will continue to strengthen and build the Sangetsu brand through collaboration with various manufacturers.
High Market ShareSangetsu’s strength is its high market share in Japan. In the years to come, we will continue our efforts to build a sustainable busi-ness model to improve the pro�tability of the interior industry as a whole.
Global Business DevelopmentWe are moving ahead with geographical expansion centered on our Paci�c Rim network. In addition to developing the Sangetsu business model in overseas markets we are working to enhance market-optimized marketing and services while focusing on handling overseas brands.
Stable Financial FoundationOn the basis of our stable �nancial foundation base, we are active-ly implementing investment strategies. We are continually working to strengthen our revenue management system, including the management of cash conversion cycles, throughout the Group.
Number of showroom staff membersNumber in charge of ID
4 3
Sangetsu logistics hubs at 11 locations in Japan (Approx. 60,000 items shipped a day)
200 supplier companies
Dealerships (Approx. 100 companies nationwide)
Interior installation companies (Approx. 100,000 companies nationwide)
“Just-in-time” deliveries realized by quick but meticulouswarehouse operations and painstaking inventory management
Tohoku
28 18
Kanto
30 12
Chubu
22 11
Kansai14 8
Kyushu
5
4
Okinawa
2
Chugoku/Shikoku
1
Hokkaido
4
Hokuriku
Sangetsu’s Strengths
Always anticipating market changes, Sangetsu con-ducts broad sales approaches that encompass the entire flow of commerce, from the upstream to the downstream. In addition, Sangetsu operates showrooms at eight locations in Japan that provide fun-filled spaces where visitors can see, select and match up products, and where our nationwide showroom staff of 111 are on hand to help customers select the products that will best suit their needs. We have also set up interior design (ID) sections at bases throughout Japan, where 55 staff members provide services requiring high lev-els of expertise, such as proposals for entire spaces.
• Sales system compatible with multiple markets• Showrooms (eight locations), ID sections (55 staff
members) deployed nationwide• Coordination and solution capabilities based on
specialized knowledge
Sangetsu carries out painstaking warehouse processing at its own logistics hubs in Japan and operates a “just-in-time” logistics ser-vice that delivers the necessary products only when they are needed. We also strive to manage products to prevent out-of-stock conditions and avoid unnecessary inventory by always providing a stable product supply by means of production plans that depend on the sales situation. In preparation for the shortage of labor in the logistics industry and rising costs, we are also working on building our own logistics system in cooperation with local logis-tics companies.
• Quick but meticulous warehouse processing for large volume orders
• Products = Approx. 60,000 items / day; Samples = Approx. 40,000 orders / day and delivered same day
• Realization of efficient and sustainable logistics services by restructuring and strengthening logistics hub network
Sangetsu boasts a diverse and abundant product lineup. The marketing and product development departments take the lead in using original data gained while attend-ing overseas exhibitions and through market research to plan and develop products that cater for diverse needs. In addition to collaborating with more than 200 di-verse manufacturers and external designers, we are continuously creating attractive products, including the procurement of overseas brand products.
• 12,000-item product lineup offering wide, overwhelming variety for the Japan market
• Strong relationships with 200 domestic and overseas manufacturers• Professional marketing, product planning and design development
groups• Planning capabilities to coordinate affluent lifestyles• Not only design but also development of superior functional products• Quality control system to provide safe, high-quality products
Sangetsu’s Proposal Capabilities
Sangetsu’s Logistics Capabilities
Sangetsu’s Product Development Capabilities
Of the Personal, Local, and Global in the
Medium-Term Management Plan “PLG
2019,” the Personal—“professionals with
high levels of expertise, powerful relation-
ships with external human resources”—in
particular represents a Sangetsu strength.
Going forward, all Sangetsu Group
employees will adapt to changes in the
business environment and work together
with our various customers and other
stakeholders to improve corporate value.
InterpersonalSkills
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16 17SANGETSU REPORT 2019 SANGETSU REPORT 2019
Growth Strategies
Contribution to“daily culture of enrichment”
Contribution toimprovement in quality
of buildings
Contribution tostrict construction schedules
for interior installations
Contribution toreducing environmental impact
Product Proposal
Product Proposal
LogisticsProposalProduct
LogisticsProposalProduct
OutcomeOutput
Input
Wallcoverings Flooring materials Fabrics
Provided Valueto SocietyExpectations of
improvement in QOL
Aging society, falling birthrate
Climate change risk
Aging buildings / infrastructure
Progress of globalization
Shift from material possessions to experiences
Decline in housing starts
Shortage of logistics drivers
Sudden rises in logistics rates
Shortage of skilled manpower for interior installation tradesmen
Increase in inbound visitor demand
Shift from manufacturing to services
Social Issues
Construction Industry Issues / Needs
Consistently pro�table since establishment
Dividend increases for �ve consecutive years
Total return ratio 245%
High shares of markets:
60,000 items/day
E • • •
S • • •
CO2 emissions 40% reduction
No serious violations of laws
Child welfare facilities that received renovation support
Total of 59Percentage of management
positions held by women
12%
• Interior Segment ¥119.5 billion Wallcoverings Business ¥57.1 billion Flooring Materials Business ¥43.1 billion Fabrics Business ¥ 8.3 billion• Exterior Segment ¥16.1 billion• Overseas Business Segment ¥20.9 billion
Sangetsu Group sales ¥160.4 billion
Company’s Financial Impact
Company’s Non-financial Impact
San
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apit
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s A
ctiv
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s
• Large number of supplier manufacturers approx. 200
• Product development staff approx. 30• Extensive design archives• Marketing know-how• e BASE integrated product database
• From long-time classics to the latest models, approx. 12,000 products• New sample books launched every 2–3
years• Product development providing excellent
functionality and workability
Create
ProductDevelopmentCapabilities
• High-quality, fully coordinated propos-als
• Proposal management by professionals in every field
• Overall level of satisfaction with Design + Function + Installation + Cost
• Supply of products to overseas markets• Cooperation with dealerships
• Sales staff approx. 470• Overseas sales staff approx. 240• Sales bases 8 branch offices / 50 offices• Showrooms 8 locations• Showroom staff approx. 110• Interior design (ID) room staff approx. 60• Advanced ordering systems EDI /
Sales core• Customer/activity management system
Salesforce
Propose
• Prompt processing after ordering, on-time delivery by shipping
• Small shipment support in units of 10cm / Numbers of sheets
• Delivered by nationwide dealership network
• Delivery network based on unique local system
• Logistics hubs 11 hubs / Approx. 218,200 m2
• Nationwide delivery network• Warehouse management with
suppliers Systems collaboration Sangetsu
Connect• Warehouse operations / shipments and Warehouse management system (WMS)
Deliver
LogisticsCapabilities
Sales increases for nine consecutive years
Growth rate over past five years 21%
Brand ConceptCorporate Philosophy
Total assets ¥170.9 billion
Net assets ¥100.1 billion
Wide, extensive deliveriesTrack record
Sangetsu’s comprehensive strengthsProduct Development × Proposals / Sales × Inventory / Logistics
Equity ratio 58%
¥26.6 billionCash and equivalentsat end of period
Robust Financial Foundation Relationships of Trust with customers
Three Principles ofSangetsu
Creative DesignsHighly Reliable Quality
Fair Market Prices
Corporate MissionTo contribute to society through
interior design and strive to create a daily culture of enrichment.
Company Creed
IntegrityBrand PurposeBrand StatementWe provide the joy of design to those who create new spaces.
E = Environmental, S=Social, G=Governance
50%, 30–50%, 23%
Proposal / SalesCapabilities
Orders received immediately shippedAverage of approx.
40,000 samples/day
Sample shipments
Average of approx.
G • • •
Value Creation at SangetsuSangetsu’s corporate mission is to contribute to society through interior design and
strive to create a daily culture of enrichment by providing the “Joy of Design.”
Amid drastic changes in the external environment,
we will refine our unique provided value while aiming for sustainable growth.
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18 19SANGETSU REPORT 2019 SANGETSU REPORT 2019
DistributionBusiness
GlobalDesign and Product
Sangetsu (Shanghai)
DistributionBusiness
GoodrichDistributionBusiness
KorosealDistributionBusiness
China Local
North America Local
Southeast Asia
Japan Local
SpecialFeature
1
ManufacturingBusiness
Under our previous medium-term business plan, we enhanced our interior
business structure, established new overseas subsidiaries and advanced
M&A to expand geographically.
Koroseal Interior Products Holdings, Inc., the U.S. company we ac-
quired in 2016, has been performing sluggishly for a while due to a number
of factors, including increased manufacturing costs and delayed launches of
new products. In 2019, however, two new facilities will be brought into op-
eration at the Louisville plant to improve productivity and profitability. We
are also starting to sell wallcoverings and fabrics from Vescom B.V., a lead-
ing European manufacturer, and are dispatching Sangetsu management
executives to advance system enhancements.
In the meantime, in the Chinese and Southeast Asian markets, Sanget-
su (Shanghai) Corporation has steadily expanded its flooring material
transactions for medical facilities and eliminated its cumulative losses last
year, the third year since its founding.
While proceeding with measures to enhance its products and sample
books, Singapore-based Goodrich Global Holdings Pte., Ltd., which was
acquired in fiscal 2017, is working to strengthen its sales systems through
office integration and showroom sharing in Shanghai as well as personnel
exchanges with Sangetsu (Shanghai).
Sangetsu (Shanghai) Corporation
Sangetsu (Shanghai) conducts sales activities for major Japanese and major Chinese real estate companies. In the previous fiscal year, in addition to its mainstay wallcoverings, the company expand-ed its flooring materials transactions and eliminated its cumulative losses. Under the encouragement of the Chinese government, the market for fully fitted homes (sale and delivery after the interiors and facilities have been installed) is advancing, and housing market demand is robust. Due to China’s ag-ing population, the number of hospitals and medical facilities is also increasing. Under such circum-stances, Goodrich’s Chinese subsidiary and Sangetsu (Shanghai)’s office will be integrated, and the Sangetsu Group will demonstrate synergies through mutual understanding and training. In November 2018, a showroom shared with Goodrich Shanghai was opened.
Koroseal Interior Products Holdings, Inc.
Koroseal has a 25% share of the North American market for non-residential wallcoverings. Together with Metro, its Canadian wallcovering sales subsidiary, the company is responsible for ex-panding the Sangetsu Group’s worldwide sales and procurement capabilities. Koroseal is currently acquiring the exclusive product sales rights in the United States for Vescom B.V., the leading manufac-turer of wallcoverings and curtains for contracts in Europe. We are also proceeding with the integration of two factories located in Louisville and the introduction of new equipment, while support-ing the expansion of facilities for the rapidly expanding sales of digitally printed wallpaper. We are also creating synergies by, for example, dispatching executives from Sangetsu and product de-velopment that utilizes Japanese materials.
Global Development of Sangetsu’s
Business ModelStrong, Pacific
Rim-based network
Build planning/procurement systems for global products
Product manufacturer globalization
Design globalization
Achieve expansion of sales network covering Southeast Asia
U.S.A. (Koroseal) and Canada (Metro) sales staff
121
Southeast Asia (Goodrich) sales staff
85
Japan (Sangetsu) sales staff
Approx. 470
China (Sangetsu (Shanghai)) sales staff 5China (Goodrich) sales staff 33
Sales staff who cover Pacific Rim
Total approx. 710
Goodrich Global Holdings Pte., Ltd.
Headquartered in Singapore and maintaining bases in 12 cities in six countries in Asia, Goodrich is the sales company that boasts the largest share of the Southeast Asian market for interior materials. Like Sangetsu managed as a fabless company with strengths in design specifications, Goodrich is currently working on the development of new sample books in collaboration with Sangetsu. In the years to come, the company will deepen its cooperation with the Sangetsu Group and work to strengthen its sales network in the Asian interior market, which is becoming increasingly glo-balized.
Distributing Interior Products with Domestic Business Know-how
No. 1 Share of Non-residential Wall- coverings Market in North America
Strong Partner with Largest Market Share in Southeast Asia
Sangetsu’s New Growth Stage
Global Strategy
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20 21SANGETSU REPORT 2019 SANGETSU REPORT 2019
Growth Strategies
SpecialFeature
2
Tokyo Logistics Center (TLC)Prior to TLC, operations were divided into multiple levels at two hubs in the Shinagawa and Katsushima areas. However, TLC has made it possible to perform one-�oor operations, which has greatly improved product shipment ef�ciency.
The new system facilitates operational collaboration and situational awareness, and delivery times have been signi�cantly shortened by improving the ef�ciency of packing and sorting operations through to delivery. Storage ef�ciency has been improved by the installation of new equipment, such as horizontal transport racks.
Future-oriented Labor-saving / AutomationIn the Kansai region, we decided to establish a new, integrated Kansai Logistics Center. To provide a model example for maintaining and improv-ing long-term logistics services, we will install new machines and equipment with labor-saving and automation as the theme. Upon its completion, the Kansai Logistics Center will increase our warehouse �oor area in Japan to 236,000 m2, equivalent to �ve Tokyo Domes.
Rebuilding Our Delivery Network According to Each Region’s CharacteristicsRecognizing the dif�culties in maintaining a delivery system by relying solely on multi-drop shipments, we are working to improve our own network in each region, the aim being a more sustainable and stable delivery system. In the Tohoku region, we deliver products from the Tohoku Logistics Center to the region’s main hubs and from there built a system to deliver to smaller areas. This has led to a stable delivery system and enhanced competitiveness.
Development / Enhancement of Personnel in Charge of Logistics OperationsIn �scal 2017, we temporarily suspended the hiring of high school graduates, who can thrive at logistics hubs, and the outsourcing policy was changed from the perspectives of operational stability, certainty of delivery and expertise. Having established a Logistics Job Classi�cation System that covers operations within logistics facilities to build a self-supporting system, we will resume the hiring of high school graduate employees from �scal 2020, while working on the enhancement of in-house personnel.
Aging buildings / facilities
Dispersed operations, with multiple facilities in one region
Space shortages
Locations adjacent to residences / schools
Issues
Consolidation from 13 hubs in Japan to 11
Hub locations take into account sustainability, efficiency and potential for expansion
HokkaidoTwo hubs Integration into one
Tohoku
Tokyo metropolitan areaThree hubs Integration into two
OkinawaNew
Chugoku/Shikoku
Logistics center floor area Total in Japan: 218,200 m2
Sangetsu Tohoku Logistics Center
Major city hub in each prefecture
Major distributors in Tohoku region
Area delivery company operators
Tohoku Region Initiative Example
Logistics network established by cooperation and co-distribution with local delivery companies
Main regional hub
Tokyo Logistics Center
Artist’s impression of Kansai Logistics Center after completion
Hub Development
Hub Development
Human Resources Delivery System
Main regional hub
Major city hub in each prefecture
Sangetsu Tohoku LC
ChubuThree hubs Integration into two
KansaiTwo hubs Planned integration into one in 2021
Kyushu
While aiming to realize a sustainable logistics system amid major environmental changes in the logistics industry—
including worsening driver shortages, more stringent legal restrictions, and small lot deliveries—Sangetsu has been
actively promoting the establishment and integration of its logistics facilities to further strengthen and improve efficiency.
In August 2016, we newly established the Kita Kanto Logistics Center (LC), which was followed by the establishment and
integration of our Chubu and Tokyo logistics centers in May 2017 and January 2018, respectively. Adding the new Hokkaido
and Okinawa logistics centers in quick succession in January and February 2019, respectively, has brought Sangetsu’s total
warehouse area in Japan to around 218,200 m2.
Logistics Revolution
Aiming to Further Strengthen Our Logistics System
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22 23SANGETSU REPORT 2019 SANGETSU REPORT 2019
Interior SegmentSales
74.5%
Sales Ratio(down 1.1% year on year)
¥119,508million
115,140 116,656
0FY2015 FY2016 FY2017 FY2018
120,852 119,508
12,478 10,9248,311
43,116
57,155
7,907
42,877
57,588
11,18310,5557,7017,781
41,37740,453
56,39456,350
Interior Segment Sales by Business (Millions of yen)
Other
Fabrics
Flooring materials
Wallcoverings
Business Highlights in Fiscal 2018
Yoshiaki KanekoExecutive OfficerGeneral Manager, Interior Business Unit
Interior Segment
Wallcovering Business
(Japan)
Creation of Social Value
Interior
Interior Segment(Japan)
Opportunities
• Pursuit of high added value in residential and contract project markets
• Product development from standpoints of environmental performance and long-life-cycle
• Joint development with overseas subsidiaries and manufacturers
Market Environment
• Construction demand in response to urban develop-ment in Tokyo metropolitan area and increasing numbers of visitors to Japan
• Decline in new housing construction and shortage of construction workers due to falling population
In fiscal 2018, the release date of the sample book was postponed owing to concerns about the
stable supply of some manufacturers’ products in the mainstay wallcoverings business. As a result,
this had a severe impact on sales in the first half of the year, but I do feel that this difficult decision—
taken to maintain a “just-in-time” stable supply of products—led to stronger bonds of trust with our
business partners.
With regard to market trends, if you subdivide the non-residential market there is light and
shade in the business conditions in each field, but even under such circumstances, I really feel that
the products we launched accurately anticipated the individual market needs. Particularly notewor-
thy results were achieved by hotels that captured inbound visitor demand and in the market for of-
fice renovations brought about by work-style reform. As strategies to further strengthen their
product development capabilities and raise their awareness of overseas markets, we dispatch
young employees to major overseas international exhibitions to promote product development that
shows awareness of global trends. In March 2019, we launched the “WARDROBE sangetsu”
E-Commerce website for fabric products and are also undertaking new challenges for online sales
to end-users.
Plans for Fiscal 2019The industry as a whole remains beset with
problems, such as the aging of skilled installa-
tion workers and craftsmen and the shortage of
labor. Particularly as the end of fiscal 2019 will
mark the peak of end-of-year demand and of
2020 Tokyo Olympics and Paralympics Games
demand, it will be necessary to develop a sys-
tem that can stably supply products, including
for installations, even under such circumstanc-
es. From a medium- to long-term perspective,
as part of strengthening our product develop-
ment capabilities we will promote the develop-
ment of new functional products that will lead
to labor savings and simpler installation. To
strengthen synergies in the wallcoverings busi-
ness as a whole, we will also push ahead with
the strengthening of collaborative systems
throughout the supply chain and launch prod-
ucts with higher added value onto the market.
Strengths
Risks and Concerns
• Shortage and aging of skilled installation workers
• Optimal inventory and stable supply
• Sudden rises in logistics rates
“Total Interior” proposals combining the three product domains of wallcoverings, flooring materials and fabrics
Accurately anticipating ever-changing market trends, boldly challenging new business models
Increase synergies throughout supply chain, introduce higher value-added products to market
47.8%
Sales Ratio
WallcoveringsSales
(down 0.8% year on year)
¥57,155million
Toyo Bunko Museum Glass Film (Transparent thermal barrier / low reflectivity)
Many of our products have been adopted in the renewal of the Toyo Bunko
Museum, a specialized library and research center for oriental studies. A trans-
parent thermal barrier film, which exhibits a thermal barrier effect while main-
taining interior brightness, was used for the front window of the Orient Hall. This
is a highly functional product that can cut about 50% of solar radiation with little
rise in glass temperature and thus can be expected to save energy throughout
the year. Used on the Orient Cafe window surface, “Leclear” reduces reflection
on the glass surface and contributes to the creation of a comfortable ambience.
Against a backdrop of urban redevelopment centered on the Tokyo
metropolitan area and ongoing demand ahead of the 2020 Tokyo Olym-
pics and Paralympics, we recorded steady sales from the “FAITH”
sample book, which featured fire-retardant wallcoverings for non-resi-
dential use. In addition, the product-specific sales of the Film Sales
Department established in April 2018 were successful, and sales of
“REATEC” self-adhesive decorative
film and glass films increased. On
the other hand, in addition to the de-
crease in new construction starts for
rental houses, there was the impact
of a temporary delay in the market
penetration of the “Reserve 1000”
and “Reform Selection” sample
books released in June, thus sales of
wallcoverings were ¥57,155 million
(down 0.8% year on year).
nvironmental
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24 25SANGETSU REPORT 2019 SANGETSU REPORT 2019
Business Highlights in Fiscal 2018Business Highlights in Fiscal 2018
Interior Segment
Flooring MaterialsBusiness(Japan)
Interior Segment
FabricsBusiness
(Japan)
Creation of Social Value
Due to the demand for office environment improvements, associated
with the promotion of work-style reform, and inbound visitor demand,
there was an increase in sales of DT/NT carpet tiles, a textile flooring
material launched in October, in the office / hotel market. The expand-
ing market for PVC floor tiles in the
residential market and in commercial
facilities, continued to drive sales.
In contrast, due to the shrinking
market trends in the medical and
welfare fields, flooring materials
sales were ¥43,116 million (up 0.6%
year on year).
Plans for Fiscal 2019Since flooring materials have larger production
facilities than those for wallcoverings, there is a
need to find sales channels in larger markets. In
addition to developing procurement and sales
strategies that meet the common needs of the
domestic and overseas markets, expanding
overseas sales channels and strengthening
business systems, we are planning to utilize
synergies within the interior business and ap-
point overseas designers as we aim for the de-
velopment of products that will be popular
globally. We will also continue to reinforce the
holding of appropriate inventory, the execution
of stable supply and improve the efficiency of
deliveries between bases. We will also further
raise our market competitiveness by linking our
product capabilities with delivery and sales ca-
pabilities.
36.1%
Sales Ratio
Flooring MaterialsSales
(up 0.6% year on year)
¥43,116million
Increase points of contact with customers and further refine product development capabilities
Launch world-class products onto market with global procurement and sales strategies
OrangeFerry’s Orange Osaka (Upholstery, curtains)
Based on the concept of wanting to meet the needs of each its customers, the
OrangeFerry company commissioned Orange Osaka, a ferry on which all the
berths are private. As a moving maritime hotel, the ship is equipped with a large
bath that allows users to enjoy the scenic views as well as with restaurants and
lounges. A number of our products, including upholstery and curtains, are used
on this luxury cruise ship, providing comfortable spaces for users due to their
excellent designs and high-quality textures.
Akasaka Intercity AIR (Carpet tiles)
Our “NT Series” carpet tiles were adopted for the high-grade Akasaka Intercity
AIR building, which opened in Tokyo’s Akasaka / Toranomon area. Made from
100% solution dyed nylon yarn, this product features excellent stain resistance,
durability and resilience as well as weather resistance. Having acquired “Eco
Mark Certification” as a product that helps protect the environment, the carpet
tiles contribute not only to beautiful design but also to the environmental perfor-
mance of the building, such as extending the service life of the interior.
Design: NIHON SEKKEI, INC. Design: NAGASAKI SEMPAKU SOBI CO., LTD.
Plans for Fiscal 2019In curtains, in addition to sales to existing interi-
or construction stores and curtain shops, in the
case of sales to major housing manufacturers,
Sangetsu Vosne, our core sales company for
curtains, will continue to promote high-add-
ed-value proposals and sales channel expan-
sion. In upholstery, we will establish an
Upholstery Business Section and work on a
review of our product structure and the further
refinement of our product development capabil-
ities. In March 2019, taking advantage of our
product development and proposal capabilities,
we launched an E-Commerce website based on
the concept of “lifestyle proposals through inte-
riors.” In addition to working to expand our sales
channels, we will utilize the E-Commerce web-
site to develop products that meet needs by
increasing our points of contact with more cus-
tomers via the website.
The “STRINGS” sample book of curtains for the home and the “Simple
Order” sample book, which pursues ease of selection with one price,
continued to drive sales. Having established sales structures in four
major cities—Tokyo, Osaka, Nagoya and Fukuoka—specialist curtain
sales company Sangetsu Vosne Corporation strengthened its sales
activities specializing in the residen-
tial field. As a result, sales of fabrics,
which combine curtains and uphol-
stery, totaled ¥8,311 million (up
5.1% year on year).
7.0%
Sales Ratio
FabricsSales
(up 5.1% year on year)
¥8,311million
Creation of Social Value
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Business Overview
26 27SANGETSU REPORT 2019 SANGETSU REPORT 2019
Exterior BusinessSales
10.1%
Sales Ratio
(up 7.4% year on year)
¥16,121million
Overseas BusinessSegment Sales
13.0%
Sales Ratio
(up 22.0% year on year)
¥20,920million
Business Highlights in Fiscal 2018
Message from the Head of the Overseas BusinessMessage from the Head of the Exterior Business
Business Highlights in Fiscal 2018
Hirofumi TakedaPresidentSungreen Co., Ltd.
Shigeyuki HasegawaGeneral Manager of Overseas Business Division
Exterior Global
Exterior Business Segment(Japan)
Overseas Business Segment
Opportunities
• Growing interest in exterior products due to extended service life of housing
• Provision of high-value-added products that meet consumer needs
Opportunities
• Development of new products drawing on Group synergies
• Active utilization of existing marketing channels
• Procurement and development of products for Japanese market
Market Environment
• Growing exterior demand due to shift in consumer needs away from those related to newly built housing
• Decline in new housing construction and shortage of construction workers due to decrease in population
Market Environment
• Robust demand for wallcover-ings in high-growth markets in China and Southeast Asia
• Stable demand for flooring materials in North America and demand for green products (environment- friendly products)
Strengths Strengths
Risks and Concerns
• Shortage and aging of skilled installation workers
Risks and Concerns
• Fluctuations in foreign exchange rates
• Laws and environmental regulations in each country
• Tax systems in each country• Securing local human resources for
management positions• Global economic downturn
Comprehensive proposals incorporating products from diverse manufacturers
“Cross-border specifi-cations” for sharing designs internationally
Creation of broad array of spaces based on excellent installation capability
Procurement and de-sign capabilities based on local networks
There was an increase in construction work for recov-
ery from natural disasters such as typhoons, and sig-
nificant increases in sales of fences and store rooms.
In public properties, demand increased for reinforce-
ment work for existing block fences and the switch to
fences. In the fourth quarter, there was the added
factor of last-minute demand ahead of price revisions
from some manufacturers, and the market was brisk.
Exterior business sales totaled ¥16,121 million (up
7.4% year on year), and operating income was ¥594
million (up 35.0% year on year).
At Koroseal Interior Products Holdings, Inc., which is responsible
for the North American market, digital printing grew mainly in the
hotel and commercial markets. At Sangetsu (Shanghai) Corpora-
tion, which covers the Chinese market, wallcoverings were solid
in the residential field, and flooring materials were solid in the
medical, welfare and commercial fields. Goodrich Global Hold-
ings Pte., Ltd., which is responsible for the Chinese and South-
east Asian markets, worked to create group synergies, such as
the integration of offices with Sangetsu (Shanghai) and the open-
ing of a shared showroom in Shanghai. As a result, the overseas
business segment recorded sales of ¥20,920 million (up 22.0%
year on year), but an operating loss of ¥960 million.
Plans for Fiscal 2019In fiscal 2019, demand for the reinforcement of exist-
ing block fences and the switch to fences will continue
to increase, and last-minute demand ahead of the
consumption tax rate hike in October and ongoing
demand in the medium term are also expected. Basi-
cally, new construction demand is expected to de-
crease, but the expectations are that will be offset by
demand for renovation and that the market will ex-
pand, with manufacturers focusing on expanding their
ranges of renovation products. The Company will also
raise awareness of its renovation products and pro-
mote sales expansion centering on products with high
added value.
Develop high-value-added products in expanding market
Strengthening collaboration with Group compa-nies to become a truly global company
Taking a great leap forward with diversity as a weapon against the ever-changing market
The market environment is characterized by stagnation in new housing starts
and a slowdown that originated from a recent review of rental housing loans.
There are also concerns about the impact in the years to come from the fore-
cast decline in the population. However, with regard to trends in the industry
as a whole over the next one or two years, in addition to disaster recovery-
related demand, we will see steady progress due to the consumption tax rate
hike and infrastructure development plans. Under these circumstances, I be-
lieve that we can make the variety that the exterior business possesses our
weapon as we take a further great leap forward and address the creation of
synergies as a member of the Sangetsu Group.
Taking on challenges of overseas markets to advance to new stage
Faced with the prospect of a shrinking domestic market, Sangetsu has pro-
moted the construction of a Pacific Rim global entity that surrounds the Pacific
Ocean since 2016 to discover paths into overseas markets. The period of pa-
tience, such as capital investment and establishment of infrastructure, will
continue, but we expect to enter a new stage of development from fiscal
2019. Although there are differences in language and senses of value, I feel
that the Sangetsu business model cultivated in Japan for many years can be
utilized overseas. We will further promote our global strategy by improving our
profit structure and strengthening product development capabilities.
Plans for Fiscal 2019In the North American market, we will strengthen coop-
eration with overseas business entities, such as by
dispatching Sangetsu executives to Koroseal, and build
a system with a view to demonstrating synergies.
Based on close cooperation with Group compa-
nies, we will focus on the development and expansion
of sales channels centered on our mainstay wallcover-
ings. In the Chinese and Southeast Asian markets, we
are continuing to make ground in selling the full range
not only of our wallcoverings but also flooring materials
and fabrics. We will further enhance the local presence
of the Sangetsu brand and further develop the markets.
Business Overview
28 29SANGETSU REPORT 2019 SANGETSU REPORT 2019
Bu
sin
es
s O
ve
rvie
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CSR Activity Topics and Related SDGs
Max
imizi
ng p
ositi
ve im
pact
sM
inim
izing
neg
ativ
e im
pact
s
R&D Raw materials / Procurement
Sales activities Logistics Installation Product use Product disposal
Developing environmentally-friendly functional products
Open innovation
Sustainableprocurement
CSR-awareprocurement
Safeguarding biodiversity
Fair transactions
Data security
Environmental impactNegative effectson human health Product safety Management of illegal waste
Reducing CO2 emissions
Health management
Promoting diversityEffective utilization of
logistics networksEmployment
creationRealizing bene�ts from
functional productsPromotingrecycling
CSR Activity TopicsESG and CSR Policies as Outlined in the Medium-Term Business Plan
(2017–2019) “PLG 2019”
Targets and Initiatives for Fiscal 2019
• Maintain full compliance with the Corporate Governance Code• Hold corporate presentations for shareholders• Engage in dialog with institutional investors and hold dialog events• Hold distributor meetings• Hold meetings for dialog between the President and employees• Implement a Board of Directors self-assessment questionnaire survey for Board members• Publish a monthly compliance newsletter• Implement compliance-related training• Ensure readiness for the application of J-SOX compliance requirements to subsidiaries• Ensure that the Sangetsu Group has no legal violations• Formulate a corruption prevention strategy in relation to bribery etc., for employees posted to overseas assignments
• Formulate and disclose a human rights policy• Actively recruit overseas talent• Promote health management• Build and maintain a �rst-class working environment• Expand job opportunities for persons with disabilities• Appoint and support female managers
• Implement questionnaire surveys for suppliers• Use visits to suppliers to verify the pace of improvements
• Provide support for the refurbishment of child welfare facilities• Expand the range of volunteering activities available so that more employees can participate• Provide ongoing support for external organizations and projects that we collaborate with• Revitalize the activities of the Sangetsu Volunteer Club (SVC)• Enhance awareness of, and revitalize, the Company’s matching gift program
• Reduce Scope 1 and 2 greenhouse gas emissions by 35% (compared to �scal 2010)• Reduce energy usage by 33% (compared to �scal 2010)• Reduce total waste generated by 15% (compared to �scal 2010)• Increase the unwanted objects recycling rate by 70%• Implement Scope 3 disclosure• Safeguard biodiversity and guard against pollution caused by chemical substances• Help to safeguard the global environment through our products• Promote environmentally-friendly “green” procurement
CorporateGovernance
Human Rights and Working Environment
EnvironmentalProtection
Social ContributionActivities
Business Practicesand Consumer Issues
Maintain and enhance the trans-parency of corporate governance and practice thorough compli-ance
Support the careers of diverse employees at each Group com-pany and provide jobs for those who are socially disadvantaged
Promote social responsibility in the supply chain
Expand social contribution activi-ties led by employees
Monitor the environmental im-pact of the Sangetsu Group as a whole and construct a system for preventing global warming and supporting the sustainable use of resources
CSR at Sangetsu
By comparison with the situation in 2014 when Sangetsu began its Third Founding Phase, we have achieved steady progress in terms of the dissemination of CSR awareness throughout the Com-pany and in the implementation of CSR-related measures. On the environmental side, because Sangetsu is not engaged in manufacturing operations, we do not directly emit significant quanti-ties of greenhouse gases. Nevertheless, we recognize our corporate responsibility to take steps to help bring about a post-carbon future, and we implement management in related areas, for example in regard to trends in the supply chain. In regard to waste, we are constantly exploring new ways to reduce our environmental foot-print, for example by implementing measures to actively promote recycling. With respect to improving the workplace environment, besides continuing to implement di-versity initiatives, including measures to promote women’s participation and advancement, re-garding the issue of health management promotion we have set ourselves the goal of further expanding healthcare provision for employees, and have launched a new Health Insurance Associ-ation. I believe that we can use this as an opportunity to implement various related measures. Corporate governance is an area that we have been proactively addressing for many years now, and our corporate governance initiatives have won praise from outside the Company. To en-sure that we continue to maintain full compliance with Japan’s Corporate Governance Code, we are making improvements to address supplementary items, etc., and have adopted a proactive stance toward disclosure. A key issue for us in the future will be building the foundations needed to support continued globalization of our operations. As I see it, we will need to implement measures to maintain compli-ance with new global standards initiatives, such as the United Nations SDGs, and to realize appropri-ate management of Group companies outside Japan, etc. In the future, we will be implementing CSR measures in a manner which ensures that Sangetsu continues to be valued by society.
In order to fulfill our corporate social responsibility, in April 2016 Sangetsu established a new CSR Promotion Section, and in April 2017 a CSR Committee was established to over-see CSR activity across the entire Company, with the Compa-ny President acting as Committee Chairperson. Recognizing the need to respond appropriately to the various international guidelines relating to CSR, five subcommittees have been established within the CSR Committee, which undertake practical CSR management and implement measures aimed at addressing social issues. In addition, a Subcommittee on Group CSR was estab-lished in April 2019 to implement CSR activities throughout the Sangetsu Group.
In relation to the Sustainable Development Goals (SDGs), which were adopted by the United Nations General Assembly in 2015, Sangetsu—whose mission is to create a daily culture of enrichment—aims to contribute toward the realization of the SDGs, and particularly those SDGs that are closely related to our business activities, such as Goal 11: Sustainable cities and communities.
CSR Management System
A Message from the Director Responsible for CSR Sangetsu’s ESG and CSR Policies as Outlined in the Medium-Term Business Plan (2017–2019) “PLG 2019”
Contribution to the SDGs
Kenji ItoDirector responsible for CSR
We Are Promoting CSR as a Foundation for Growth.
Corporate Philosophy
Company Creed: Integrity
Corporate Mission: To contribute to society through interior design and strive to create a daily culture of enrichment.
Three Principles of Sangetsu: Creative Designs, Highly Reliable Quality, Fair Market Prices
Brand Concept Brand Statement: Joy of Design
Sangetsu Group Compliance Code of ConductSangetsu Group Corporate Ethics Charter(Sangetsu Group CSR Basic Policy)
Brand Purpose: We provide the joy of design to those who create new spaces.
CSR Committee
Secretariat: CSR Promotion Section
Board of Directors Audit Committee
Chairperson: President
Chief Supervisor: Responsible Directors
Subcommitteeon Business
Practices andConsumer Issues
Subcommitteeon CorporateGovernance
Subcommitteeon Group CSR
Subcommitteeon Human
Rights and WorkingEnvironment
Subcommitteeon
EnvironmentalProtection
Subcommitteeon Social
ContributionActivities
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30 31SANGETSU REPORT 2019 SANGETSU REPORT 2019
Dialog between Institutional Investors and Audit Committee Members
What types of changes in governance have resulted from the establishment of the Audit Committee?
Mr. Kunihiro Nasu: Sangetsu Corporation was able to achieve growth thanks to the outstanding management skills and fore-sight of its founding President, the late Mr. Yoshiaki Hibi. However, both employ-ees and directors became too reliant on Mr. Hibi’s leadership, and it seems that there may have been occasions when this prevented employees and directors from coming up with their own proposals and ideas. Since Mr. Shosuke Yasuda took over as President, there has been a strengthen-ing of the supervisory function, and the Board of Directors’ discussions have be-come more lively. Items presented for discussion by the Board are now dis-cussed several times, and not approved until a consensus has been reached, which makes for a productive tension in Board meetings. Mr. Masatoshi Hatori: In the case of mo-tions that are difficult to decide on, such as those concerning M&A activity, it is not always possible to reach consensus im-mediately. However, even in cases where, for example, eight directors are in favor of the motion and two are opposed, the deci-sion isn’t just rammed through by majority vote. I suspect it may be slightly irritating for the President, Mr. Yasuda, who normal-
ly likes to get things done quickly, but I get the strong impression that he wants man-agement policy to be decided on the basis of discussion that everyone can accept.Ms. Michiyo Hamada: President Yasuda made the bold decision to set up the Audit Committee so that “I myself will be super-vised.” I think it is fair to say that, because the process of reforming corporate gover-nance was so well matched to the situa-tion that the Company found itself in at the time, of the companies in Japan that have adopted the Audit Committee sys-tem, Sangetsu Corporation has been par-ticularly successful in making the system work effectively.
How do external directors participate in relation to the motivation and commit-ment needed for the Company to real-ize its plans?
Mr. Tamotsu Kokado: As an external direc-tor, I tend to attach the most importance to whether the Company is getting the balance right—in terms of management resources and growth—in relation to the Medium-term Business Plan, overseas expansion, and particularly strategic deci-sions that will pave the way for the Com-pany’s future development. Of course, it is important for the Company to challenge itself; as far as governance is concerned,
I would say that there are no problems to speak of. If, as individuals, we have differ-ing views about something, then we dis-cuss it, but of course I realize that the final decision has to be made by the company’s executive officers.
In fiscal 2018, earnings were below the initial projection. Do you think that perhaps more rigorous cost control is needed?
Kokado: All of the executive officers, in-cluding President Yasuda, are very cost-minded, but the current situation is that their efforts have not yet started to bear fruit. Sangetsu was around 10–20 years behind the times in terms of its lo-gistics and systems. For the time being, the Company is still laboring under the depreciation burden from the investments that needed to be made in order to rectify this situation.Hatori: Nevertheless, if you look at San-getsu’s competitors, many of them have not yet started to take the kind of steps that Sangetsu has been taking. This means that, although Sangetsu has post-ed high levels of selling, general and ad-ministrative (SG&A) expenses over the past few years, once the Company starts to recoup its investment, it should be in a very advantageous position in terms of its competitiveness vis-à-vis rival firms.
Sangetsu Corporation proactively canvasses external
views in order to put in place and maintain a governance
system characterized by a high degree of transparency.
As an example of one of the opportunities for obtaining
the views of outside parties, in September 2018, and
again in March 2019, Sangetsu held meetings between
institutional investors and Audit Committee members.
The information presented here is based mainly on the
discussions at the second of these meetings.
Given that the domestic housing mar-ket in Japan is contracting, how is San-getsu planning to develop its domestic business?
Hatori: By comparison with the market for residential buildings, demand for rebuild-ing and renovation of non-residential build-ings is actually growing quite strongly. Although it is true to say that competition in this segment is also quite intense be-cause firms in other industries such as healthcare firms and care home operators have been moving into this market, San-getsu has more in-depth knowhow than rival firms in terms of how its installation operations are structured. Sangetsu is cur-rently in the process of strengthening it-self so as to be able to secure a share of new markets.Nasu: Sangetsu does more than just sell materials; through its collaboration with affiliate companies, it is able to provide an integrated total solution that covers every aspect of materials provision and installa-tion work. Furthermore, as one of the leading companies in the industry, it is able to negotiate to secure fair prices and to get buyers to shoulder the burden of rapidly rising delivery costs.
It seems as though the profitability of Sangetsu’s overseas subsidiaries is lower than it appeared when Sangetsu first acquired the companies. What is the reason for that? And what kind of
strategies is Sangetsu thinking about adopting to remedy the situation?
Kokado: Sangetsu’s biggest acquisition has been U.S. company Koroseal. I think the biggest issue there has been building up the production system. It was fairly obvious that the production line was not very efficient by comparison with Japa-nese production lines, and Sangetsu is currently engaged in transforming it to create a Japanese-style production line.Hatori: Regarding Koroseal’s production efficiency, the level of efficiency at Koro-seal is actually not bad by American stan-dards. However, when measured by Japanese standards, it is unsatisfactory.
With Sangetsu’s involvement, there should be considerable potential for im-provement.Nasu: Sangetsu is also working to realize more effective communication and mutual understanding with Koroseal regarding management matters.Mr. Takashi Tajima: More specifically, San-getsu is putting in place a system that al-lows effective follow-up on the managerial side, for example by sending a manager from Sangetsu out to the U.S. to act as an assistant to Koroseal’s President, in the role of Executive Vice President. I believe that measures like this will start to bear fruit soon.
Aiming to Enhance Corporate Value and Realize a More Effective Governance System
Attendees
Kunihiro NasuOutside Director, Chairperson of Audit CommitteeAttorney, Nasu Iwasaki Horitsu Jimusho(Former Vice President of Japan Federation of Bar Associations)
Sangetsu Corporation
Yusuke NaitoIchiyoshi Research Institute Inc.
Tamotsu KokadoFormer Outside Director, Member of Audit CommitteeAdvisor of MUFG Bank, Ltd.(Former Deputy President of MUFG Bank, Ltd.)
Masatoshi HatoriOutside Director, Member of Audit CommitteeFormer Executive Vice President and Representative Director of Kaneka Corporation
Michiyo HamadaOutside Director, Member of Audit CommitteeProfessor Emeritus of Nagoya University(Former Commissioner of Japan Fair Trade Commission)
Takashi TajimaFormer Director, Member of Audit CommitteeFormer Manager of Secretary Section
Institutional Investors
Keisuke YasudaAsset Management One Co., Ltd.
Katsumi HosoiTokai Tokyo Research Institute Co., Ltd.
Naoki KogaSumitomo Mitsui DS Asset Management Company, Limited
Strengthening Governance
The Domestic Market
Overseas Operations
The Process of Formulating the Company’s Plans
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32 33SANGETSU REPORT 2019 SANGETSU REPORT 2019
Corporate Governance
Separation of the supervisory and executive functions in managementIn order to strengthen the independent, objective oversight of the Board of Directors,
Sangetsu has adopted a new corporate governance system and management execution
system that separates the supervisory and executive functions of management.
Sangetsu’s Company Creed is “Integrity,” and we aim to en-
hance corporate value by building good relationships with all
stakeholders and developing these relationships steadily over
the long term.
We realize that, to achieve this goal, we need to position
the strengthening of corporate governance—with the transpar-
ency, speed and efficiency of management as its founda-
tions—as a key management issue.
Sangetsu has transitioned to become a company with an
Audit Committee, with the aim of strengthening the auditing
and supervisory functions with respect to the Board of Direc-
tors by having external directors participate in management.
We are striving to achieve further enhancement of corpo-
rate value on the basis of this governance system.
The Company’s Board of Directors consists of four external
directors and three internal directors and meets once a month
to share timely and appropriate information on corporate man-
agement and to draw up management strategies. In accordance
with the Articles of Incorporation, all or part of the decision-mak-
ing responsibilities regarding the execution of certain operations
have been delegated from the Board of Directors to the repre-
sentative director (President) to speed up the decision-making
process. The Board of Directors monitors the progress of mat-
ters delegated to the representative director.
The Audit Committee consists of four external directors and
one full-time internal director.
While the Audit Committee relies mainly on audits utilizing
the internal control system, members also conduct direct on-
site audits of business sites inside and outside Japan. The
committee seeks to strengthen the effectiveness of its audits
by gathering and sharing valuable information through the peri-
odic exchange of views with the President, reports presented
by executive directors and employees, and liaison meetings of
audit committee members at affiliated companies. The com-
mittee is actively involved in the execution of the right to state
an opinion with respect to the election and remuneration of
executive directors and executive officers in an effort to en-
hance governance.
Starting from June 2019, Sangetsu has strengthened its corpo-
rate governance system by enhancing the oversight function
with respect to the Board of Directors through the appoint-
ment of two executive directors and five Audit Committee
members (of which four are independent external directors).
Under this system, we will seek to revitalize discussions
from the point of view shareholders and also strengthen the
audit and supervisory functions over the execution of the
Company’s operations. Furthermore, the term for the account-
ing auditor, who tends to be reappointed, has been limited in
principle to a maximum of ten years with the intention of en-
suring and maintaining greater independence and appropriate
external audits. The Company has thus established a system
for enhancing the transparency of its corporate management.
The Sangetsu Group has also sought to enhance its corpo-
rate value by establishing or revising relevant rules, such as
those for managing business investment risks. It also estab-
lished a system for bolstering consolidated management in
April 2017 by introducing a system that assigns oversight to
the supervising divisions at affiliated companies and creating
the Consolidated Management Section.
Corporate Governance System
Key Areas Where We Are Working to Strengthen Governance
Our Basic Approach to Corporate Governance
Board of Directors Audit Committee
Fiscal2019
5 2 4 3
Fiscal2018
5
Directors who also serve as AuditCommittee members
5 4
Independent external directors
6
Internal directors
Execution External Internal
Executive directors
Oversight
Framework of the Corporate Governance System
Election and Removals Election and Removals
Nomination and RemunerationCommittee
Election and Removals
Financial and Internal Control Audits
InternalAudit
Audit by the A
uditC
omm
ittee
Execution of Operations
General Meeting of Shareholders
Units and Subsidiaries
President
ManagementMeeting
Audit Committee (5 members: 4 external and
1 internal)
Inte
rnal
co
ntr
ol s
yste
mIn
tern
al A
ud
itin
gD
epar
tmen
t
Audit Committee Of�ce
Board of Directors (7 Board members: 4 external and 3 internal directors)
Executive Directors
Nomination and RemunerationAdvisory Committee Nomination and Remuneration Committee
10 7
Acc
ou
nti
ng
Au
dit
or
Cooperation
Supervising the execution of operations
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34 35SANGETSU REPORT 2019 SANGETSU REPORT 2019
Once a year, each director conducts a self-assessment
of the Board of Directors, which is followed by an analy-
sis and assessment of the effectiveness of the Board as
a whole. The survey covered a broad range of assess-
ment criteria, from the composition of the Board to the
quality of discussions and dialogue with stakeholders.
A questionnaire survey was administered to all di-
rectors in fiscal 2018 (implemented between December
2018 and January 2019). After approval by the Board of
Directors, the assessment results were disclosed in the
Company’s Corporate Governance Report.
Assessing the Effectiveness of the Board of DirectorsStandards of Independence for External Directors
In December 2018, Sangetsu switched over from having a Nomina-
tion and Remuneration Advisory Committee to a Nomination and
Remuneration Committee, chaired by an external director, thereby
helping to enhance the transparency and objectivity of matters relat-
ing to directors’ appointment and remuneration.
In fiscal 2015, the Company changed its system of compensa-
tion for executive directors from the traditional policy of paying a
fixed sum as basic compensation to a structure comprising (1) basic
compensation, (2) performance-linked compensation (monthly), and
(3) stock-based compensation through stock options. Furthermore,
the Company replaced stock options with restricted stock in fiscal
2017, thereby creating a performance-linked compensation structure
comprising (1) basic compensation, (2) performance-linked compen-
sation (bonuses), and (3) restricted stock, which provides clear in-
centives for the further sharing of value with shareholders and for
the continued enhancement of corporate value. Meanwhile, direc-
tors who are members of the Audit Committee receive only basic
compensation that is not linked to performance.
• The composition of the Board of Directors was generally well-balanced, but some adjustments were needed to achieve a better gender balance and a more international composition.
• The scope of delegation of authority to the representative director was clearly specified, and appropriate.• The Board of Directors was able to engage in risk-taking and to implement speedy, bold decision-making in order to enhance
the Company’s corporate value.• The Board of Directors engaged in free, open and constructive discussion, and the quality of discussion of individual mo-
tions was high.• Although, overall, efforts had been made to improve the method of operation of the Board of Directors compared to the
previous year, there was still room for further improvement.• There were opportunities to hear the views of stakeholders, and an effort was being made to report such views fully to the
Board of Directors.
Policy for Determining the Remuneration of Directors
Main assessment items and results
The Company holds a compliance seminar for directors with
lectures by outside experts, and encourages directors to at-
tend outside seminars. To aid independent external directors in
raising their awareness of the state of operational execution,
the Company conducts onsite inspection tours and provides
opportunities for exchanging views with management, in addi-
tion to orientation sessions at the time of their appointment.
Seminars and Other Activities for Directors
Expertise and Activity of Audit Committee Members Who Are Also External Directors
In addition to satisfying indepen-
dence criteria, as defined by the
Companies Act of Japan and listed
stock exchanges, Sangetsu Corpora-
tion appoints external directors that
possess the advanced expertise and
wealth of experience required to
provide candid and constructive ad-
vice on company management. The
Standards of Independence applied
to external directors are as follows.
1. Individuals for whom none of the following currently applies:(1) a shareholder who owns more than 5% of the voting rights of Sangetsu Corpora-
tion or an executive officer of the shareholder;(2) an executive officer of a company whose transactions with Sangetsu Corporation
exceed 2% of Sangetsu’s consolidated sales or a subsidiary of said company;(3) an executive officer of a major lender of Sangetsu Corporation, whose lending to
the Sangetsu Group exceeds 2% of Sangetsu’s consolidated total assets as of the most recent fiscal year end;
(4) a certified public accountant who belongs to Sangetsu Corporation’s accounting auditor;
(5) a consultant, accounting expert, or legal expert who receives an annual sum of ¥10 million or more in monetary or other benefits from Sangetsu Corporation in addi-tion to remuneration paid by Sangetsu. In the event the recipient of such benefits is a corporation or organization, any individual who belongs to such a corporation or organization;
(6) an executive officer of an organization that receives an annual sum of ¥1 million or more in donations from Sangetsu Corporation;
(7) a second-degree relative of an individual who falls under any of the above-men-tioned (1) to (6); and
2. an individual for whom none of the above-mentioned (1) to (7) applied at any point in the past three years.
Method Used to Evaluate the Effectiveness of the Board of Directors in Fiscal 2018
Improvement measures in fiscal 2018
January
EarlyMarch
LateMarch
Questionnaire survey for directorsUtilization of a third-party organization for survey planning and data aggregation
Report to the Board of DirectorsSharing of ideas regarding future issues and strategies
Collation of survey resultsDiscussion among externaldirectors only
Working towards measuresfor further improvement
0
160,000
(Thousands of yen)
120,000
80,000
40,000
FY2017 FY2018 FY2017 FY2018Criteria:
Net income¥4,514 million
Restricted stock compensation
Performance-linked compensation
Basic compensation
Criteria:Net income
¥3,579 million
Executive directors(5 people)
25.5%
12.6%
61.8%
27.5%
68.2%
100% 100%
4.3%
Directors also serving as Audit Committee members
(5 people)
Kunihiro Nasu
Masatoshi Hatori
Michiyo Hamada
Kenichi Udagawa
Lawyer
Academic
100% attendance rate (13 out of 13 Board Meetings)
100% attendance rate (13 out of 13 Board Meetings)
100% attendance rate (13 out of 13 Board Meetings)
—
NameClassi�cation Attendance at Board Meetings in Fiscal 2018
Corporatemanage-
ment
Financialand
accounting
Area of expertise
Admini-strativeOverseas Legal
Previously Worked at Another Company
Previously Worked at Another Company
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36 37SANGETSU REPORT 2019 SANGETSU REPORT 2019
Shosuke Yasuda
Directors
Executive Of�cers
Representative Director, President and CEO
April 2004 Executive Vice President and Division COO, Functional Chemicals Division, Mitsubishi CorporationApril 2008 Executive Vice President and General Manager of Chubu Branch, Mitsubishi CorporationApril 2012 Executive Vice President, Mitsubishi CorporationJune 2012 Director, the CompanyApril 2014 Representative Director and PresidentJuly 2014 Representative Director and President, General Manager of the Interior DivisionApril 2016 Representative Director, President and CEO, and General Manager of the Interior DivisionApril 2019 Representative Director, President and CEO (To present)
(Signi�cant concurrent positions)Chairman of the Board of Directors of Koroseal Interior Products Holdings, Inc.Director of Goodrich Global Holdings Pte., Ltd.
Reasons for nomination as candidate for Director
After taking of�ce as Representative Director and President of the Company in 2014, Mr. Shosuke Yasuda led the transition of the Company from over 60 years of management centered on the founding family and achieved the quantitative target of consolidated net income of ¥6,300 million stipulated in the Medium-Term Business Plan, which he played a central role in formulating.
Subsequently, the Company is now entering the third and �nal year of the Medium-Term Business Plan announced in 2017. Amid this, the Company has been strengthening functions through methods such as reforming sales structure and redistributing logistics centers, advancing a business strategy for realizing sustainable growth, and expanding business geographically by acquiring overseas companies, establish-ing local subsidiaries, and the like. The Company is also implementing capital policy such as a �nancial policy to improve capital ef�ciency, a shareholder return policy that aims to maintain the total return ratio on the consolidated basis above 100% over three years, and a capital allocation policy. Given these experiences and achievements, the Company deemed that he is well quali�ed to continue to serve as a Director.
Attendance to Meetings of the Board of Directors held in FY2018: 13/13
Kunihiro Nasu IndependentExternal
IndependentExternal
IndependentExternal IndependentExternal
Outside Director (Audit Committee Member)
April 1969 Registered with the Nagoya Bar Association (current Aichi Bar Association) (To present)
October 1975 Established Nasu Kunihiro Horitsu Jimusho (To present)
April 1999 Chairperson of the Nagoya Bar AssociationJuly 2003 Chairperson of the Aichi Prefectural Personnel
CommissionJune 2007 Audit & Supervisory Board Member of the CompanyJune 2015 Outside Director (Audit Committee Member) of the
Company (To present)
(Signi�cant concurrent positions)AttorneyOutside Audit and Supervisory Board Member of Central Japan Railway Company
[Supplementary explanation to the independence]
1. From March 2000 to March 2003, Mr. Masatoshi Hatori served as the Representative Director & President of FUSOGOSEI Co., Ltd., a business partner of the Compa-ny. However, over 16 years have passed since he resigned from said company and he therefore ful�lls the Company’s Standards of Independence for Outside Directors and the Company has deemed that there are no issues regarding his independence.
2. Since 2016, Mr. Kenichi Udagawa has been serving as Outside Director of The Yamaguchi Bank, Ltd., which is under the corporate umbrella of the Yamaguchi Financial Group. No transactions are carried out between the Company and The Yamaguchi Bank, Ltd.
Reasons for nomination as candidate for Outside Director serving as an Audit Committee Member
Mr. Kunihiro Nasu possesses a wealth of experience and keen specialist insight as an attorney. In addition to actively providing opinions on corporate law at Board of Directors’ meetings and the like, he also plays a role in the supervision and auditing of management. The Company has deemed that Mr. Nasu’s insight can continue to be utilized in company management and requests that he be elected as an Outside Director serving as an Audit Committee Member.
Attendance to Meetings of the Board of Directors held in FY2018: 13/13
Attendance to Meetings of the Audit Committee Members held in FY2018: 12/12
Masatoshi HatoriOutside Director (Audit Committee Member)
June 2003 Director of Kanegafuchi Chemical Industry Company Limited (current KANEKA CORPORATION)
June 2005 Executive Director of KANEKA CORPORATIONJune 2006 Director and Managing Executive Of�cer of KANEKA
CORPORATIONApril 2008 Director and Senior Managing Executive Of�cer of
KANEKA CORPORATIONJune 2010 Executive Vice President and Representative Director
of KANEKA CORPORATIONJune 2014 Special Advisor of KANEKA CORPORATIONJune 2015 Outside Director (Audit Committee Member) of the
Company (To present)
Reasons for nomination as candidate for Outside Directorserving as an Audit Committee Member
Mr. Masatoshi Hatori possesses a wealth of experience and keen specialist insight related to not only various materials business-es, but also processing business as an individual with experience as a representative director of a listed company (materials manufacturer). In addition to actively providing opinions on corporate management and opinions regarding materials in products handled by the Company at Board of Directors’ meetings and the like, he also plays a role in the supervision and auditing of management. The Company has deemed that Mr. Hatori’s insight can continue to be utilized in company manage-ment and requests that he be elected as an Outside Director serving as an Audit Committee Member.
Attendance to Meetings of the Board of Directors held in FY2018: 13/13
Attendance to Meetings of the Audit Committee Members held in FY2018: 12/12
Kenichi UdagawaOutside Director (Audit Committee Member)
(Signi�cant concurrent position)Outside Director of The Yamaguchi Bank, Ltd.
Reasons for nomination as candidate for Outside Director serving as an Audit Committee Member
Mr. Kenichi Udagawa has contributed to the establishment and expansion of various overseas businesses in a listed company. In addition, he possesses a wealth of experience and keen special-ist insight as an individual with experience as a representative director. The Company has deemed that Mr. Udagawa’s insight on overall corporate management and overseas business operation can be utilized in corporate management at the Board of Directors’ meetings and the like, and thereby requests that he be elected as an Outside Director serving as Audit Committee Member.
June 2004 Director of Tosoh CorporationJune 2008 Managing Director of Tosoh CorporationJune 2009 President of Tosoh CorporationMarch 2016 Director and Corporate Adviser of Tosoh CorporationJune 2018 Honorary Adviser of Tosoh CorporationJune 2019 Retiring Honorary Adviser of Tosoh Corporation
Shuji SasakiDirector (Audit Committee Member)
Reasons for nomination as candidate for Director serving as an Audit Committee Member
Mr. Shuji Sasaki has worked in a wide range of areas as General Manager of the Marketing Department, Flooring Division, and Sales Division. He is well versed in the domestic interior industry and the Company’s circumstances, and has abundant practical knowledge and experience. In regard to the gathering of information on daily operations within the Company and listening to regular business reports from the departments executing business at Audit Committee meetings, and his activities as Audit Committee Member (including individual reports, conversations with the departments, information regarding employees and inside the Company, and dialogue with shareholders outside the Company and investors) the Company has deemed that Mr. Shuji Sasaki is capable of elevating the functions of supervision and auditing of the Company’s management to even higher levels, and hereby requests that he be elected as an Outside Director serving as Audit Committee Member. If elected, he will ful�ll the role of Full-time Audit Committee Member.
Attendance to Meetings of the Board of Directors held in FY2018: 13/13
* He attended Meetings of the Board of Directors held in FY2018 as an executive of�cer.
March 1979 Joined the CompanyFebruary 2012 General Manager of Okayama BranchJune 2014 Director and General Manager of Okayama BranchJuly 2014 Director and General Manager of the Flooring Division
and Marketing DepartmentApril 2015 Director in charge of the Marketing and General
Manager of the Flooring DivisionApril 2016 Director, Managing Executive Of�cer and General
Manager of the Sales DivisionApril 2019 Director (To present)
Michiyo Hamada Female
Outside Director (Audit Committee Member)
(Signi�cant concurrent positions)Outside Board Member of Aisin Seiki Co., Ltd.Outside Audit & Supervisory Board Member of Toho Gas Co., Ltd.Outside Auditor of the Metropolitan Expressway Company Limited
Reasons for nomination as candidate for Outside Director serving as an Audit Committee Member
Ms. Michiyo Hamada possesses a wealth of experience and keen specialist insight as a scholar of corporate law and ex-commis-sioner of the Japan Fair Trade Commission. In addition to actively providing opinions on corporate law and opinions regarding the Company’s efforts to promote women’s participation and advancement in the workplace at Board of Directors’ meetings and the like, she also plays a role in the supervision and auditing of management. The Company has deemed that Ms. Hamada’s insight can continue to be utilized in company management and requests that she be elected as an Outside Director serving as an Audit Committee Member.
Attendance to Meetings of the Board of Directors held in FY2018: 13/13
Attendance to Meetings of the Audit Committee Members held in FY2018: 12/12
April 1985 Law professor at Nagoya UniversityApril 1999 Professor of Nagoya University Graduate School of
LawApril 2008 President of Nagoya University School of LawApril 2009 Professor emeritus of Nagoya University (To present)
Commissioner of Japan Fair Trade CommissionJune 2015 Outside Director (Audit Committee Member) of the
Company (To present)
Kenji ItoDirector, Executive Of�cer in charge of General Affairs, Human Resources, Management Audit and Information System and General Manager of the President’s Of�ce
(Signi�cant concurrent position)Auditor of Sangetsu (Shanghai) Corporation
Reasons for nomination as candidate for Director
Having worked for many years on legal affairs and auditing in his previous positions, Mr. Kenji Ito has abundant knowledge and experience. Since joining the Company, he has engaged in promoting compliance and corporate governance reform as General Manager of the Management Audit Department. Since 2017, in addition to his efforts in legal affairs and auditing, as the Director in charge of department of management including General Affairs, Human Resources and Information System, he has been supporting the enhancement and expansion of the Company’s business foundation, including by promoting ESG and CSR and building a new core system. Given these experiences and achievements, the Company deemed that he is well quali�ed to continue to serve as a Director.
Attendance to Meetings of the Board of Directors held in FY2018: 13/13
June 2001 General Manager of Legal Department, TOYOTA INDUSTRIES CORPORATIONJune 2006 General Manager of Safety and Health, and Environment Departments, TOYOTA INDUSTRIES
CORPORATIONJanuary 2008 General Manager of Safety and Health Promotion Department, TOYOTA INDUSTRIES CORPORATIONMarch 2009 Standing Director of TOYOTA INDUSTRIES HEALTH INSURANCE SOCIETY (Secondment)July 2010 General Manager of Audit & Supervisory Board Of�ce, TOYOTA INDUSTRIES CORPORATIONJuly 2014 General Manager of the Management Audit Department, the CompanyApril 2016 Executive Of�cer in charge of General Affairs and Human Resources and General Manager of the
Management Audit DepartmentJune 2016 Director, Executive Of�cer in charge of General Affairs and Human Resources and General Manager
of the Management Audit DepartmentApril 2017 Director, Executive Of�cer in charge of General Affairs, Human Resources, Management Audit and
Information System and General Manager of the President’s Of�ce (To present)
1 2
3 4
6 7
5
Shousuke Yasuda
Yasutomo Yoshikawa
Kenji Ito
Yoshiaki Kaneko
President and CEO
Senior Executive Of�cer, Sales Business Unit
Executive Of�cer, In charge of Administrative Unit
Executive Of�cer, General Manager of Interior Business Unit
Executive Of�cer, General Manager of Logistics Division
Executive Of�cer, General Manager of Non-residential Business Department
Senior General Manager, President of Sangetsu Vosne Corporation
Senior General Manager, Chief Branch Manager of Kyushu Branch
Senior General Manager, General Manager of Residential Business Department
Senior General Manager, General Manager of Management Audit Division
Senior General Manager, Chief Branch Manager of Kansai Branch
Senior General Manager, Chief Branch Manager of Tokyo Branch
Yosuke Mine
Taro Shibagaki
Takashi Morita
Satoru Miyata
Kazuhito Harada
Hidenori Masuda
Mikio Otsuka
Hirohisa Nakagawa
2531467
Board of Directors
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38 39SANGETSU REPORT 2019 SANGETSU REPORT 2019
Compliance Training in Fiscal 2018
Fiscal 2019 Risk Management System Diagram
Topic
Compliance
Antimonopoly Act
Subcontract Act
Period Participants
April
May
December
September
December
37 new employees
17 newly assigned managers
14 employees of Sangetsu Vosne Corporation
45 business review meeting participants
17 Interior Business Unit staff members
Company-wide Risk Management Committee
Risk Management Secretariat(General Affairs Department)
Info
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Compliance Risk Management
Sangetsu has positioned compliance as a vitally important
aspect of our corporate operations, and we are working to
strengthen our compliance measures. Whenever a compli-
ance-related issue emerges, we take prompt corrective action.
We strive to make effective use of the reporting (whistleblow-
ing) system, etc., to identify any problems, issues or obstacles
within the Company that may hinder the thorough perfor-
mance of compliance, and we work diligently on a Compa-
ny-wide basis to implement improvements.
Sangetsu has established a Company-wide Risk Management
Committee, headed by the Company President. Besides striv-
ing to maintain and enhance the corporate value of the Sanget-
su Group as a whole and to minimize the impact of risks as
they emerge, the committee also implements risk manage-
ment with respect to various types of risk that could affect the
Company’s activities or its employees. The Company-wide Risk
Management Committee meets on a quarterly basis; in addi-
tion to formulating the basic policy, systems, etc., for risk
management as a whole, the committee also has the function
of organizing task forces when necessary, etc. The committee
reports on the status of its activities to the Board of Directors
once every six months, thereby enabling the Company’s senior
management to accurately monitor current risks and make
appropriate managerial decisions.
In addition, we have sought to bolster consolidated man-
agement by establishing rules for managing business invest-
ment risks. We have clarified the definition of a business
investment risk to build a system for managing risks under
consolidated management.
Sangetsu has set up helplines for internal reporting and consul-
tation, which can be used by all employees regardless of em-
ployment status, including employees of Sangetsu subsidiaries
within Japan. Besides these internal helplines, Sangetsu has
also established external contact windows, providing the op-
portunity for consultation with members of the Audit Commit-
tee or with external attorneys. In fiscal 2018, we reviewed the
existing system and revised our Compliance and Reporting
Rules. We strive to ensure advance prevention of compliance
issues, harassment, or other workplace behavior or human
rights issues that could cause employees unease or worry, and
we endeavor to ensure that violations are discovered at an
early stage, and to make any necessary improvements. Whis-
tleblowers can communicate or consult anonymously, and be-
sides respecting whistleblowers’ privacy, we have drawn up
internal rules aimed at ensuring that employees do not suffer
any adverse effects as a result of using the helplines for com-
munication or consultation.
The Sangetsu Group Compliance Code of Conduct includes
stipulations relating to corruption prevention, including the
prohibition of bribery, exclusion of anti-social forces (i.e., orga-
nized crime groups), etc. We have also drawn up our own
Bribery Prevention Rules, and have put in place a system for
organization-wide measures to prevent bribery. Several of our
overseas subsidiaries have formulated their own corporate
codes of conduct based on the Sangetsu Group Compliance
Code of Conduct, in line with local laws and practices.
Sangetsu’s Compliance Program, which is drawn up on the
basis of Company policy, is implemented throughout the year
at all Sangetsu Group companies. With the aim of building a
sound organizational framework that ensures thorough compli-
ance, we implement the regular dissemination of related infor-
mation and provision of training for all employees. Recognizing
the need for ongoing improvement through utilization of the
PDCA cycle, at the end of each fiscal year we review the Com-
pliance Program on the basis of the year’s activities and any
issues that have come to light during the activity implementa-
tion process, and then make any necessary adjustments.
Our Approach to Compliance Risk Management System
Under the Sangetsu Group Compliance Code of Conduct, the
Company has set up a compliance committee and helplines for
reporting and consultation. Each department has appointed a
person responsible for compliance in order to maintain a com-
prehensive system of rules, laws, regulations and corporate
guidelines to create an open environment. We are also working
to establish and improve compliance systems throughout the
Sangetsu Group as a whole, including Sangetsu subsidiaries
within Japan and the Group’s overseas business entities.
Compliance System
Compliance Helplines
Corruption Prevention and Bribery Prohibition Initiatives
Compliance Education
To effectively reduce risks, Sangetsu has been conducting risk
assessment with the guidance of a risk assessment map.
Based on the risks identified by each Risk Management Sub-
committee, the frequency and probability of occurrence, im-
pact and level of control are mapped to identify key risks and
points at which risk response is inadequate. Results of the as-
sessment are monitored by the Company-wide Risk Manage-
ment Committee to ensure that each risk is managed
appropriately and effectively according to its level of control.
Risk Management Subcommittees are formed through the designation of a super-vising department for each category of risk, with a membership comprising relevant managers and a Subcommittee head. (For details of the individual Subcommittees, please refer to the Fiscal 2019 Risk Management System Diagram)
The Corporate Philosophy Handbook, which covers com-pliance and other aspects of corporate ethics, is distribut-ed to all employees of Sangetsu subsidiaries within Japan. The aim is for the Handbook to serve as a guideline for employees which they can refer to repeatedly.
The Compliance Newsletter is distributed regularly by Sangetsu’s internal mail sys-tem. The aim is to realize an ongoing en-hancement of employees’ compliance awareness by incorporating topical infor-mation into the newsletter.
Risk Assessment
Risk Management Subcommittees
Corporate Philosophy Handbook
Compliance Newsletter
Sangetsu has ensured that all employees are aware of its BCP
and implements disaster drills for all employees and at show-
rooms in anticipation of a contingency. We are working to
strengthen our capability in the event of a disaster to set up the
Emergency Response Headquarters and prepare it to swiftly
execute actions. This headquarters is led by the President as
the director-general and is responsible for confirming the safe-
ty of employees and the restoration of business operations.
The BCP is reviewed each year to strengthen our response in
line with changes in the social environment.
Business Continuity Plan (BCP)
BCP Objectives
• First, ensure the safety of company employees, their families and other people.
• Second, safeguard the Company’s assets and prevent the ex-pansion of damage.
• Third, quickly initiate disaster-relief efforts for the continuation of the business and its operations.
Preventive and response measures are clearly in place and are effective.
Preventive and response measures are clearly in place, but ineffective aspects remain.
Preventive and response measures are only partially in place.
Preventive and response measures do not exist.
Level of control
Risk Assessment Map
1
3
2
5
4
1 to 5: Relevant risk categories
Pro
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40 41SANGETSU REPORT 2019 SANGETSU REPORT 2019
Sangetsu respects the diversity, character and individual-ity of employees, ensures sound operations to enable each employee to perform at their full potential while playing a meaningful role in the Company’s operations, and provides a safe and pleasant working environment.
Human Rights—Diverse Work Styles
Sangetsu has been reforming its personnel system as a priori-
ty initiative aimed at building a corporate structure that allows
employees to participate in management, and we have been
introducing new measures in this area since April 2015.
We are promoting efforts to ensure that the working environ-
ment is pleasant and sound for employees, thereby enabling
them to maintain their mental and physical health. We attach
particular importance to training our employees in safety and
hygiene including aspects such as the maintenance of emer-
gency supplies (for use in the event of a natural disaster), di-
saster readiness drills, etc., and our work-related accident rate
is lower than the average incidence level for our industry. Dis-
crimination and harassment are prohibited, and we strive to
build a fair, pleasant workplace environment. The establish-
ment of the Sangetsu Health Insurance Union in April 2019
represented a further enhancement of our measures to foster
the physical and mental well-being of our employees.
Sangetsu embraces diversity so that each employee can fully
demonstrate their initiative and capabilities and engages in
various initiatives. We are pursuing measures for promoting
successful careers for our diverse human resources, including
our Return to Work system that supports reemployment and
transition to full employee status for former employees, initia-
tives for hiring persons with disabilities, and the creation of a
pleasant workplace for all employees, regardless of gender
identity, sexual orientation or other attributes.
We are implementing various initiatives to improve and strength-
en our labor management systems with the aim of creating a
workplace filled with job satisfaction in which employees are
highly motivated in their roles. We are working to promote em-
ployees’ work-life balance from a variety of perspectives. To cite
just a few examples, we have implemented flexible work pro-
grams including flextime and teleworking, utilize G Suite* and
other information and communications technology (ICT) technol-
ogies, provide subsidies for babysitting costs, and have entered
business tie-ups with private-sector childcare providers.* Groupware tools for improving productivity provided by Google that use cloud
computing
Building a Corporate Structure that Allows Employees to Participate in Management
Initiatives for Industrial Safety and Hygiene and Health Management
• Promote respect for human rights—in accordance with the Universal Declaration of Human Rights
(UDHR)—and diversity in step with the globalization of the Sangetsu Group.
• Provide equal opportunity to diverse employees regardless of their employment status and main-
tain favorable working environments and develop programs for maintaining and improving employ-
ee health.
• Raise the ratio of female managers to 15% or higher in Japanese operations by 2020.
• Promote expansion in job positions for persons with disabilities and raise the disabled persons
employment ratio to 3.0%.
Goals
Support the careers of diverse employees at each Group company and provide jobs for those who are socially disadvantaged
ESG and CSR Policies as Outlined in Medium-Term Business Plan (2017–2019) “PLG 2019”
Promoting Diversity
Diversity in Work Styles
Ratio of Female Managers
12.0%(as of April 2019)
13.10 -14.09
14.10 -15.09
15.10 -16.09
16.10 -17.09
No. of days of paid leave taken
17.10 -18.09
Ratio of employees taking paid leave
2017
No. of working mothers (persons)
Ratio of working mothers (%)
Ratio of Employees Taking Paid Leave
Ratio of Working Mothers
29.8%
100
75
50
25
0
(Persons) 12
6
0
(Days)
60
30
0
(%)
150
100
50
0
(Persons)
60
40
20
0
(%)
40
30
20
10
022
4756
6172
29 32 35 36
42
2015 2016 2017 2018 2019(Year) (Year)
(Non-consolidated)
(Year.Month)
Assistant Managers Chief Managers and other Managers
8.2 10.1 10.7 11.4 12.0
27.824.2
Ratio of women in management positions
Ratio of female assistant managers
6475
8833.9
57.2%(October 2017–September 2018)
(as of April 2019)
31.4 32.9
96
27.8
52.952.9 51.951.9 50.857.2
108
2015 2016 2018 2019
16.221.3 22.7
26.729.8
(%)
5.1 9.6 9.5 9.2 10.6
71
93101
121135
Direction of Personnel System Reform
Building a corporate structure that allowsemployees to participate in management
Maintain and increase employees’
sense of security
Realize sound management
Maintain and increase employees’ sense of se-curity, so that they can envision their future and advance their careers
• Enhanced system for an-ticipating the number of employees the Company will need to have on staff in each grade by 2025
• Improved salary system t o r a i s e e m p l o y e e awareness of the Com-pany’s earnings perfor-mance and expansion plans.
Enhance employee motivation
• Proactive assignment of human resources
• Improve how we treat human resources and ensure fair remunera-tion for one’s efforts
(as of March 31, 2019)
Employment Rate of Persons with Disabilities
2016
No. of employees with disabilities (persons)
Employment rate of persons with disabilities (%)
30
20
10
0
(Persons)
6
4
2
0(FY)
SangetsuLGBT ALLY mark2014
22
2015
24 24
2017
26
2018
31
2.2 2.4 2.3 2.4 2.7
(%)
• Frequency rate: Number of injuries or fatalities per million hours worked (Frequency of work-related accident)• Severity rate: Lost time injuries per thousand hours worked (Severity of work-related accidents)
Frequency and Severity Ratesfor Work-related Accidents (FY2018)
SangetsuWholesale andRetail Industry
0.41 2.08
0.0004 0.10
Frequency Rate
Severity Rate
Employees’ mindsetand behavior
Use of IT Use of programs
Three elements of work-style reform
“Creating a workplace environment �lled with job satisfaction”where everyone aspires to take on new challenges
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42 43SANGETSU REPORT 2019 SANGETSU REPORT 2019
Implementation of a Questionnaire Survey Targeting Suppliers
Based on the amountof purchasingSurvey Response Rate
Implementation of Training for Purchasing Managers
We provide personnel assigned to purchasing-related departments with education and training on our basic stance regarding CSR-aware purchasing—including Fair and Equal Treatment, Observance of Laws, Regulations and Ethics, Responsibility to Society, etc.—based on the Sangetsu CSR Procurement Policy. With society demonstrating grow-ing demand for CSR-aware purchasing, we will continue to focus on human resources cultivation in this area in the future.
In January 2019, we asked our business partners to participate in the Sangetsu CSR Procurement Survey. The Survey was administered to all suppliers (excluding overseas suppliers). Suppliers were asked how satis�ed they were with Sangetsu, what areas they felt Sangetsu needed to focus on in the future, etc. Completed surveys were returned by over 80% of suppliers.
97.2%
Based on the numberof suppliers
80.4%
115 out of 143questionnairescompleted and
returned
(Non-consolidated)
Sangetsu is building a system to strengthen quality, environmental
and CSR-related measures in line with the Sangetsu CSR Procure-
ment Policy and Sangetsu CSR Guidelines for Business Partners,
which were formulated to enhance CSR measures targeting the sup-
ply chain. Sangetsu is not directly involved in manufacturing opera-
tions, with the manufacturing of products being undertaken by our
suppliers; nevertheless, we are continuing to implement activities
aimed at strengthening management of the entire supply chain, so
that we can provide our customers with high-quality, environmentally
friendly products.
Supply Chain Integration
Sangetsu implements thorough quality management by evaluat-
ing multiple aspects of suppliers’ operations in line with our
company’s independently developed assessment items, and by
encouraging suppliers to make improvements to their produc-
tion facilities, etc. Overseas candidate suppliers’ factories are
evaluated using audits, and we strive to enhance the overall
quality management level for suppliers both within and outside
Japan. Using the latest testing devices, we implement sampling
inspection of materials, evaluate the physical properties of ma-
terials from the development stage onwards, and undertake
analysis with respect to customer complaints. We also perform
acceptance inspection for selected products.
Product Quality Management
Environmental testing lab
By collaborating with our suppliers on a basis of mutual trust, we are able to provide customers with attractive products that they can use with safety and peace of mind, and in this way we are disseminating our brand con-cept—Joy of Design—as widely as possible throughout society.
Together with Customers and Suppliers
• Ask our suppliers to complete questionnaire surveys based on the Sangetsu CSR Procurement
Policy and the Sangetsu CSR Guidelines for Business Partners, with the aim of realizing improve-
ments throughout the whole supply chain, from purchasing to installation.
• Develop products that meet customer needs and provide solutions to their problems.
Goals
Promoting CSR in the supply chainESG and CSR Policies as Outlined in Medium-Term Business Plan (2017–2019) “PLG 2019”
Productdevelopment Procurement Manufacturing Distribution Marketing
Sangetsu Group Corporate Ethics Charter
Sangetsu CSR Procurement Policy
Sangetsu CSR Guidelines for Business Partners
Contributing to the Resolution of Social Problems through Our Products, by Fostering Closer Integration with Suppliers
Those of us working in Sangetsu’s Merchandise Development Section are engaged in the development of new products, working closely with a large number of suppliers (i.e., manufacturers). Based on a thorough understanding of the Sanget-su CSR Procurement Policy and Sangetsu CSR Guidelines for Business Partners, we are not only implementing measures to strengthen product quality but also to ensure the realization of sound, fair transactions. In addition, by ensuring that suppliers also have a good understanding of Sangetsu’s CSR policies, we are able to contribute towards solving social problems through our products.
Masahiko SakatoChief Manager, Merchandise Development Section, Wallcoverings Department
We provide customers with information about our products and
interiors in a wide range of formats, and help customers to de-
velop a clearer picture of our products and services. Our dedicat-
ed staff provide interior consultations covering the special
features of our products and related trends, and we proactively
provide information by making effective use of ICT, for example
our MyPhoto Simulator, a system whereby, if the customer
sends us photos of the interior space in advance, we can pro-
vide coordination simulation for them when they subsequently
visit the Sangetsu showroom.
Providing Information from the Customer’s Perspective
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44 45SANGETSU REPORT 2019 SANGETSU REPORT 2019
Activities in Fiscal 2018
1. Continue to support the refurbishment of welfare facilities, centered on child welfare facilities, as means for contributing through our Interior Business.
2. Create programs that encourage employees to participate in social contribution activities in their free time on weekdays.
3. Implement the Sangetsu Matching Gift Pro-gram, a system of matching donations by the Company to supplement the value of employee social contribution activities.
Number of Sangetsu Volunteer Club child welfare facility refurbishment projects undertaken in �scal 2019
Sangetsu’s Social Contribution Initiatives
• Support for refurbishment and craft workshops using Sangetsu merchandise at child welfare facilities throughout Japan
• Neighborhood cleaning, inviting elementary and junior high school students on �eld trips to experience the workplace
• Social contribution through sports• Blood donations in collaboration with the Japanese Red Cross Society
• Volunteer activities in affected areas• Donations of funds and goods to disaster-affected areas (e.g., sending
carpets to gymnasiums and other facilities that serve as evacuation shelters)
• Donations to hospitals
• Donations for culture, social welfare, education, etc.
• Introduction of electricity with lower environmental impact• Tree planting and cleanup activities• Participation in biodiversity conservation activities• Support for environmental organizations• Installation of a solar power generating system (Chubu Logistics Center)
Regionalcontributions
Assistance todisaster-
affected areas
Environmentand
energyconservation
Fundraising anddonations
Social andcultural activities 20
Sangetsu contributes in a variety of ways through its core business, with clear roles and responsibilities for enriching daily life by
providing comfortable living spaces.
Supporting the Refurbishment of Child Welfare Facilities
Sangetsu has focused its efforts on activities to support the refurbishment of child welfare facilities in Japan. This is so more people
can enjoy comfortable living spaces created using our interior materials, such as wallcoverings, flooring materials, curtains and uphol-
stery. We carried out refurbishments at 20 facilities in fiscal 2018 (total between April 2014 and March 2019: 59 facilities).
Social Contribution through Our Core Business
Using Sangetsu’s Employee Cafeterias to
Fund School Meals for Children in Need
Sangetsu is participating in the Table For Two program, through which employees can
donate part of the cost of their meals in the employee cafeteria to pay for school
meals for children in need in Africa and Asia. When employees are eating in the San-
getsu employee cafeteria, they have the option of having one side-dish removed from
the meal, which helps the employee to cut down on calories and also funds a dona-
tion of 20 yen to help pay for children’s school meals. To celebrate the achievement of
funding more than 10,000 school meals in 2018, Sangetsu held a special African
Festival at which employees had the chance to eat African cuisine from some of the
countries that have received aid through this program. As of March 31, 2019, Sanget-
su had donated a cumulative total of 13,383 meals.
A Program for Delivering Picture Books
to Children in Asia
Sangetsu is taking part in an initiative for delivering picture books to children in Asian
countries who have never read one before because of social problems such as pover-
ty or civil conflict. The proceeds from the sale of used books that employees bring in
are combined with donations by the Company to purchase sets of picture books
which then have stickers bearing the text translated into local languages attached to
them, before being sent to countries such as Cambodia, Myanmar and Afghanistan.
This program helps children to acquire the habit of reading and writing. In fiscal 2018,
Sangetsu supported the delivery of 40 picture books in this way.
Promoting Volunteering Activity
Picture book with stickers bearing the translated text
In order to contribute, in collaboration with local commu-nities, toward the enrichment of society, Sangetsu Corpo-ration continues to implement social contribution activities, with the main focus of the activities being to contribute to society through our business, and through the voluntary activity and hard work of our individual employees.
Social Contribution Activities
• Support the refurbishment of child welfare facilities (20 or more projects per year).
• Create a system that enables employees to participate in social contribution activities using their
free time on weekdays, and which incorporates matching donations made by the company accord-
ing to the amount of employees’ social contribution activities.
Goals
Expand social contribution activities led by employeesESG and CSR Policies as Outlined in Medium-Term Business Plan (2017–2019) “PLG 2019”
We undertook refurbishment of the Minna-no-hiroba play-room at the Social Welfare Corporation Kyosei-Juku child welfare facility in Kanazawa City, Ishikawa Prefecture. Up until then, the children had been playing on tatami mats and rugs placed on a hard, cold floor; to provide them with a space where they could play while sitting comfortably, we covered the whole floor with carpet tiles, and we also installed new curtains, w h i c h w e r e d e c o r a t e d w i t h a n orange-colored fruit motif. The children’s eyes lit up when they saw the new play-room, which had been transformed into a bright, cheerful space with an artistic feel to it.
Refurbishment of the Minna-no-hiroba play-room at the Social Welfare Corporation Kyosei-Juku child welfare facility (July 2018)
| A c t i v i t y O u t l i n e |
Before After
ES
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46 47SANGETSU REPORT 2019 SANGETSU REPORT 2019
*All data are calculated on a per unit of sales basis
GHG Emissions
31.7% reduction(Actual results in �scal 2018) (Actual results in �scal 2018)
Energy Consumption Recycling Rate
75.0%
(%)
40
30
20
10
02010 2015 2016 2017 2018
32.6% reduction(Actual results in �scal 2018)
0
2,500
5,000
7,500
10,000
0.0
30.630.6 31.331.3 31.231.2 31.731.7
8,066
9,485
8,062 8,306 8,118
150,864 (%)
40
30
20
10
02010 2015 2016 2017 20180
40,000
80,000
120,000
160,000
GHG emissions
Rate of decrease compared to �scal 2010 on a per unit of sales basis
Energy consumption
Rate of decrease compared to �scal 2010 on a per unit of sales basis
Amount recycled (t)Waste (t)
Recycling rate
116,637128,666 132,292 127,535
0.0
36.836.8
30.930.9 30.930.9 32.632.6
(GJ)(t-CO2)
(FY) (FY)
0
1,000
2,000
3,000
4,000
2014 2015 2016 2017 2018
40.840.8 58.058.067.267.2
75.075.0
(t)
1,3551,355
2,4162,4161,9951,995
3,3203,3203,6023,602 3,4403,440
4,0414,041
2,7142,714
4,0434,043
3,0323,032
(FY)
(%)
80
40
60
20
0
67.167.1
(Non-consolidated)
Monitor the environmental impact of the Sangetsu Group as a whole and construct a system for preventing global warming and supporting the sustainable use of resources
ESG and CSR Policies as Outlined in Medium-Term Business Plan (2017–2019) “PLG 2019”
• Systematically reduce greenhouse gas (GHG) emissions, energy consumption and waste, and
promote recycling in every business activity
• Monitor GHG emissions from the Sangetsu Group’s business activities and create plans for ulti-
mately achieving zero emissions
Goals
Sangetsu is striving to reduce GHG emissions, as part of the Company’s efforts to help mitigate the impact of global warming. Starting from 2017, we have been working to calculate Scope 3 GHG emis-sions for the whole supply chain, and are proceeding with the estimation and monitoring of our environ-mental footprint. We are also promoting eco-driving (i.e., the use of environmentally friendly driving styles, emphasizing fuel efficiency and safety); by implementing a number of measures that include using telematics systems to control rapid acceleration and unnecessarily rapid braking, disseminating the eco-Bulletin news-letter which features comic strips with original characters, implementing an eco-driving commendation system for sales personnel, switching over to using vehicles that have superior fuel consumption, etc., we have succeeded in improving our fuel consumption by more than 25% compared to the situation before these new measures were imple-mented. In the 2018 Ecodrive Activity Concours awards, Sangetsu was awarded the En-vironment Minister’s Award, the highest award in the General section of the awards.
Category Item Scope of Estimation1 Purchased goods and services2 Capital goods
3 Fuel- and energy-related activities (not included in Scope 1 or Scope 2)
4 Upstream transportation and distribution5 Waste generated in operations6 Business travel7 Employee commuting8 Upstream leased assets
Category Item Scope of Estimation
9 Downstream transportation and distribution
10 Processing of sold products11 Use of sold products *12 End-of-life treatment of sold products13 Downstream leased assets *14 Franchises *15 Investments *
Sangetsu products are environmentally friendly in the ways they are used. We are contributing to improving both the global environment and living environments through the development and sale of green products while categorizing them under the four +1 categories.
Mitigating Global Warming
Environmental Protection through Products
Sangetsu recognizes the vital importance of the world’s limited resources, and we are implementing “3R” (Reduce, Reuse, Recycle) activities to help ensure that resources are utilized effi-ciently. Starting from fiscal 2016, we have been working to strengthen waste reduction and recycling as part of our ze-ro-emissions activity, which itself has been strengthened through initiatives in which the subcommittee on environmental protec-tion has been playing a central role. For example, our sample books are made from a mixture of paper and PVC; if these are separated, around 93% of the material from which the books are made can be recycled. Sangetsu’s Chubu Branch and Chugoku/Shikoku Branch have been collaborating on this waste separation work with local welfare facilities for people with disabilities. Through this activity, our goal is to both strengthen resource recy-cling and help people with disabilities to achieve more autonomy.
Sangetsu has a correct understanding and awareness of how humanity and the global environment benefit from biodiversity, and we are striving to help safeguard biodiversity and to use its benefits in a sustainable manner. Reflecting the fact that the linings for our wallcoverings are made from paper pulp, in fiscal 2018 we began collaborating with NPO Nagoya Higashiyama Forest Conservation Group on the implementation of forest conservation activities at the Tenpaku Valley Wetlands, an area of wetland forest in Nagoya City. We will continue to participate in this activity on an ongoing basis in the future, with the aim of handing down a thriving forest to the next generation.
Realizing a Recycling-based Society Protecting Biodiversity
Sangetsu’s business operations are closely linked to the global environment, and so our company naturally has a corporate responsibility with respect to environmental protection. Besides working to reduce the environmental footprint of our own business activities, we are also striv-ing to build a better and more environmentally friendly living environment.
Safeguarding the Global Environment
Scope 3 Response
Energysaving1
Resourceconservation2
Long-life product3
Indoorenvironments4
Protectingbiodiversity
Waste paper
Recycling
Samplebooks
Removedobjects, etc.
Removed objectsother than
waste paper
Recycling Flow for Sample Books
SangetsuCorporation
Welfare facilitiesfor disabled
persons
Waste paperrecycling company
Thermalrecycling company
* Excluded from scope of estimation
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48 49SANGETSU REPORT 2019 SANGETSU REPORT 2019
Average number of paid vacation days taken (October to September of following year)
EnvironmentalE
SocialS
GovernanceG
8,663
120,428
3,350
40.8
1,442
1,167
776
391
35.0
37.6
29.6
14.1
16.6
9.0
70
31
6.3
16
32
2,062
9.6
2.2
0
0
1
1
0
9
1
0
11.1
1,020
8,066
116,637
3,322
67.1
1,474
1,196
782
414
35.0
37.6
30.0
14.1
16.6
9.0
83
47
8.2
32
44
2,024
9.5
2.4
0.41
0.0008
14
9
5
11
4
1
36.4
408
8,062
128,666
3,296
58.0
2,051
1,190
777
413
35.5
38.0
30.8
14.5
17.0
9.9
57
23
10.1
39
41
2,051
9.2
2.3
0.41
0.0008
22
12
10
10
4
1
40.0
113
8,118
127,535
3,695
75.0
2,334
1,167
740
427
36.7
39.1
32.2
15.5
18.1
10.9
42
25
11.4
42
68
2,110
—
2.7
0.41
0.0004
28
20
8
10
4
1
40.0
170
8,306
132,292
3,688
67.2
2,357
1,205
776
429
36.0
38.4
31.5
14.9
17.4
10.3
63
33
10.7
45
56
2,100
10.6
2.4
0.40
0.0063
29
19
10
10
4
1
40.0
663
Indicator Unit FY2014 FY2015 FY2016 FY2017 FY2018Female Hires / Recruitment Ratio
2014 2015 2016 2017 2018 (FY) (FY)
(People) (%)
Through the implementation of strategic personnel system reforms, we are promoting the creation of an organization enabling women themselves to make the most of their strengths and systems that support them. We have been proactively recruiting female employees for over 50% of positions during the past �ve years.
2014 2015 2016 2017 2018
10.9
(Years)
We aim to foster a spirit of dedication and a sense of belonging to the Company among employees and become a company that is rewarding, challenging and motivating to work at for each and every employee. As one indication of the success of these efforts, the average number of years employed has steadily grown among both men and women.
Employees Engaged in Temporary Part-time Work While Child-rearing (As of March 31 in each �scal year)
Number of Employee Resignations (Excluding Retirees) and Attrition Rate (As of March 31 in each �scal year)
Average Years of Continuous Employment by Gender (As of March 31 in each �scal year)
Number of Employees with Mental Health Issues and Rate of Occurrence (As of March 31 in each �scal year)
We promote systems and an environment enabling employees raising children to continue working. A rising number of employees utilize temporary part-time work while child-rearing system, which is part of the employment environment we created to support a balance between work and home life.
Number of Employees Recognized with Awards (As of April 1 in each �scal year)
We aim to become a Company that fosters employee motivation and aspiration, and grows along with our employees. We offer level-speci�c and function-speci�c training in addition to approximately 200 distance-learning courses and provide �nancial assistance for costs associated with acquiring quali�cations. We maintain an environment that proactively encourages employee self-improvement.
We respect the human rights of each and every employee, prohibit unreasonable discrimination and harassment, and strive to create a fair and cheerful workplace. We promote the creation of workplace environments that maintain physical and mental health resulting in the attrition rate over the last �ve years remaining at 4% or less.
Men Women
The Sangetsu Medium-Term Business Plan targets health management as one of its objectives, and to this end we are developing activities to maintain and promote employee health. We work with industrial physicians and public health nurses to promote comfortable work environments fostering mental and physical health, and as a result, mental health problems are maintained below the national average.
0
10
20
30
40
50
2014 2015 2016 2017 2018
(People)
0
20
40
60
80
5
10
15
20
0
20
40
60
80
100
2525
2014 2015 2016 2017 2018 (FY)
0.58%
(People) (%)
0
5
10
15
0
1
88
2014 2015 2016 2017 2018 (FY)(FY)
(People) (%)
0
25
50
75
100
0
6
4747
6868
2015 2016 2017 2018 2019 (FY)
(People)
0
200
400
600 534534
18.1
Female hires Recruitment ratio
Number of employee resignations (excluding retirees) Attrition rate
Number of employees with mental health issues Rate of occurrence
Note: Employees who have missed work for one month or longer due to mental health issues.
FY201912.0
FY201970
FY20197
FY201957.1
3.7%
59.5%
GHG emissions
Energy consumption
Waste
Recycling rate
Consolidated number of employees(as of March 31 of each year)
Number of employees (as of March 31 of each year)
Men
Women
Average age(as of March 31 of each year)
Men
Women
Average length of service (as of March 31 of each year)
Men
Women
New hires (total)
Women
Ratio of female managers (as of April 1 of each year)
Number of employees takingchildcare leave
Number of employees on temporary part-time work whilechild-rearing
Average total work hours
Employment rate of persons with disabilities (as of March 31 of each year)
Frequency rate of work-related accidents
Severity rate of work-related accidents
Social contribution activities of Sangetsu Volunteer Club
Refurbishment of social welfare facilities
Other activities
Number of directors (as of June 31 of each year)
External directors
Female directors
Ratio of external directors
Number of compliance training participants
t-CO2
GJ
t
%
People
Age
Age
Age
Years
Years
Years
%
Hours
Days
%
Cases
Cases
Cases
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
Number ofpeople
%
Company Information
Non-financial Highlights (Sangetsu Corporation only) ESG Data (Sangetsu Corporation only)
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50 51SANGETSU REPORT 2019 SANGETSU REPORT 2019
Net Sales
2014 2015 2016 2017 2018
80
120
160
40
0
160.42
3.57
In addition to improving business execution capabilities such as product develop-ment and sales capabilities, we engaged in efforts including the development of Sangetsu’s own delivery system and product price revisions, but sales declined slightly in the Interior Business. At the same time, the launch of the Goodrich consolidation in the Overseas Business and Exterior Business contributed to net sales increases.
(Billions of yen)
Equity Ratio
2014 2015 2016 2017 2018
80
100
60
40
58.0
57.2
With respect to total assets as of the end of the current fiscal year, current assets increased and noncurrent assets decreased from the end of the previous fiscal year. The equity ratio fell by 3.4% from the end of the previous fiscal year, as net assets decreased due to share buybacks under the capital strategy of the medium-term business plan.
(%)
Pro�t Attributable to Owners of Parent
2014 2015 2016 2017 2018
4
6
8
2
0
Intangible asset impairment associated with U.S.-based subsidiary Koroseal Interior Products Holdings, Inc., caused profit (loss) attributable to owners of parent to decline 20.7% compared to the previous fiscal year.
(Billions of yen)
Net Income per Share
2014 2015 2016 2017 2018
100
50
0
Although the Company proceeded to buy back shares under the capital strategy of the medium-term business plan, net income per share declined due to the decrease in net income.*A share split was carried out at the rate of two shares per common share on April 1, 2015. Net income per share has been calculated assuming that the share split was carried out at the beginning of fiscal 2014.
*Starting in fiscal 2017, the Overseas Business segment was added by including the medium-term business plan’s strategy for overseas markets and operations under consolidated management.
*In April 2019, all shares in Yamada Shomei Lighting Co., Ltd., were transferred to Odelic Co., Ltd.
(Yen)
Return on Equity (ROE)
2014 2015 2016 2017 2018
6
8
4
0
2
Equity decreased to around ¥99.1 billion and net income decreased, and as a result, ROE fell to 3.5%. At the same time, return on invested capital (ROIC) increased 4.5%, up 0.8 point.
(%)
Segment Information
2014 2015 2016 2017 2018
125
100
75
50
25
0
In the Interior Business, the Company achieved a steady increase in the market share of its key products. In the Exterior Business, demand for fence replacements boosted sales. In the Overseas Business, sales rose 22.0% compared to the previous fiscal year.
(Billions of yen)
Dividend per Share (Annual)
2014 2015 2016 2017 2018
60
45
30
With respect to profit distribution, the company is seeking to sustainably expand its shareholder return strategy over the medium to long term, based on its medium-term business plan. Accordingly, the Company paid an interim dividend of ¥28.00 per share and a full year dividend of ¥28.50 per share, which is an increase of ¥1.00 per share from the previous fiscal year.*A share split was carried out at the rate of two shares per common share on April 1, 2015. Net income per share has been calculated assuming that the share split was carried out at the beginning of fiscal 2014.
(Yen)
Interior Business Exterior BusinessLighting Business Overseas Business
Cash Conversion Cycle (Itemized)
2014 2015 2016 2017 2018
150
120
90
60
30
Operating capital efficiency, indicated by the cash conversion cycle (CCC), was 76.0 days, the shortest number of days in the past ten years. Recently, lengthening of the payable turnover period has contributed to an improved CCC.
(Days)
March 31, 2018
March 31, 2019
Current Medium-Term Business Plan (2017–2019)
Previous Medium-Term Business Plan (2014–2016)
* Growth investments: M&A, minor investments (for strengthening alliances), capital investments (logistics, IT, etc.)
Cash and equivalents as of March 31, 2017
¥30.0 billion
Debt (Medium-Term Business Plan)
¥13.3 billion
Growth investments*
¥10.0~25.0 billion
Operating cash flow (Medium-Term Business Plan)
¥31.0~38.0 billion
Shareholder returns
¥25.0~33.0 billion
Debt (Medium-term Business Plan)
¥0~22.0 billion
Term-end cash, equivalents
¥25.0~30.0 billion
Capitalgeneration /procurement
Capitalallocation
Total number of shares acquired through buybacks Total amount of share buybacks
Interim dividend (December payment) Year-end dividend (June payment) Total dividend amount
Total return amount Consolidated total return rate
3,420 thousand shares ¥6.97 billion
234.0%¥10.56 billion
¥3.58 billion¥1.78 billion¥1.79 billion
Total number of shares acquired through buybacks Total amount of share buybacks
Interim dividend (December payment) Year-end dividend (June payment) Total dividend amount
Total return amount Consolidated total return rate
2,455 thousand shares ¥5.28 billion
245.5%¥8.78 billion
¥3.50 billion¥1.75 billion¥1.75 billion
Receivable turnover period Inventory turnover periodPayable turnover period CCC
3.5
Operating cash flow (Medium-Term Business Plan)
¥25.6 billion
Cash and equivalents as of March 31, 2014
¥44.0 billion
Term end cash, equivalents
¥29.8 billion
Growth investments
¥26.2 billion
Shareholder returns
¥26.9 billion
114.988.876.049.9
119.5
16.124.2220.92
56.5
(FY) (FY)
(FY) (FY)
(FY) (FY)
(FY) (FY)
Financial Highlights Capital Policy
Although Sangetsu is sensitive to business conditions related
to the construction market, our business performance is sta-
ble. Since going public in 1989, we have never recorded losses
on either a consolidated or non-consolidated basis and have
generated solid profits.
In the domestic market, which is a stable, core source of
our earnings, we are promoting business growth through the
geographical expansion and functional enhancement of our
Interior Business (planning, procurement, distribution and
sales). We also continuously strive to shorten the cash conver-
sion cycle (CCC).
Our policy for net cash is to maintain a level of cash and equiv-
alents around ¥25.0 billion to ¥30.0 billion. Also, growth invest-
ments are generally within the scope of operating cash flows.
Financial Policy for Improvement of Capital Efficiency
Sangetsu will continue to conduct share buybacks and steadily
increase dividend payments with the goal of reducing its net
worth to between ¥105.0 billion and ¥100.0 billion in light of
conditions within capital markets.
Based on this policy, in the past two fiscal years Sangetsu
increased dividends and conducted share buybacks. The year-
end dividend of this fiscal year will be ¥28.50, amounting to an
annual dividend of ¥56.50, the fifth straight fiscal year of divi-
dend increases.
The total return to shareholders in fiscal 2018 will consist
of dividends amounting to ¥3.5 billion and share buybacks
amounting to ¥5.2 billion, for a total of ¥8.7 billion and a total
return rate of 245.5%.
As a result, at the end of the fiscal year under review equity
amounted to ¥99.1 billion, total shares outstanding amounted
to approximately 62.85 million shares, including approximately
1.37 million shares of treasury stock. (As of June 30, 2019,
treasury stock amounted to 1.85 million shares.)
Stable Cash Flow Generation Capability Shareholder Return Policy of Medium-Term Business Plan
Achieve over 100% total consolidatedshareholder return ratioover a three-year period
Conduct stable increases in dividends over the long term
Conduct share buybacks flexibly and in response to stock market conditions
A Strong Financial Foundation Maintained by Financial Discipline
01
02
03
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52 53SANGETSU REPORT 2019 SANGETSU REPORT 2019
FY2010 FY2011 FY2012 FY2015 FY2016 FY2017 FY2019 (Forecast)
Pro�t and Loss
Financial Condition 138,908
118,084
209
142,247
119,409
200
139,205
117,672
168
—
—
—
Per ShareInformation
Financial Indicators —
—
—
61.5
—
—
—
—
(Millions of yen)
*A share split was carried out at the rate of two shares per common share on April 1, 2015. Per share indicators show figures adjusted based on the current number of shares.
Basic Initiatives Results Remaining Issues
1Establish a sound corporate structure that allows employees to actively participate in management
2
3 Strengthen stakeholder value• Enhanced shareholder return strategy• Social contribution activities based on employee initiative • Formulate and implement clear environmental policy
4Passing on our corporatephilosophy, principles, and visionsince our founding
• Consistently pass on corporate principles
Basic Initiatives Basic Policy (Excerpt)
1 Business strategy for growth Geographically expanding and enhancing the functionality of the interior materials business (planning, procurement, logistics, sales)
2 Enhance human resourcesCultivate professionals, fully commit to merit-based approach, promote diversity, reform work styles, promote health management
3 Bolster profit management systemReduction in SGA and thorough management control, set targets for ROE and CCC on a consolidated basis and monitor progress
4 ESG and CSR policiesReduce environmental impact of supply chain, social contribution activities led by employees, strengthen governance system
5 Capital strategy Buy back shares, provide stable increase in dividends
Cash ConversionCycle
112,118
32,938
7,161
7,530
4,242
(2,883)
4,437
(7,320)
(3,041)
118,518
33,775
7,095
7,180
4,151
213
422
(209)
(3,198)
123,150
34,536
8,020
8,393
4,806
7,902
4,311
3,591
(7,506)
Net sales
Gross profit
Operating income
Ordinary income
Profit attributable to owners of parent
Free cash flow
Operating cash flow
Investing cash flow
Financing cash flow
Total assets
Net assets
Interest-bearing debt
Net income per share (Yen)
Net asset per share (Yen)
Dividend per share (Yen)
Return on assets (ROA) (%)
Return on equity (ROE) (%)
Equity ratio (%)
Consolidated payout ratio (%)
Cash conversion cycle
Receivable turnover period (days
Inventory turnover period (days)
Payable turnover period (days)
52.87
1,471.53
37.50
51.73
1,488.05
37.50
60.26
1,544.27
39.00
5.5
3.6
85.0
70.9
5.1
3.5
83.9
72.5
6.0
4.1
84.5
64.7
102.7
125.3
32.5
55.1
114.9
134.8
37.1
57.0
118.9
127.1
41.8
50.0
132,050
37,510
8,031
8,506
4,402
10,899
4,765
6,134
(7,692)
133,972
39,527
9,112
9,463
6,393
25,988
10,834
15,154
(13,528)
135,640
40,104
7,572
8,368
6,570
(12,320)
10,072
(22,392)
7,533
156,390
47,572
5,033
5,698
4,514
1,464
7,196
(5,732)
(4,831)
163,000
52,500
8,000
8,300
5,700
—
—
—
—
143,076
118,758
93
139,220
108,517
3
169,344
110,458
14,187
171,419
106,360
18,759
58.35
1,625.21
41.25
89.92
1,587.86
47.50
97.53
1,646.42
52.50
68.97
1,648.71
55.50
92.72
—
57.0
5.9
3.7
83.0
70.7
6.7
5.6
77.9
52.8
5.4
6.0
65.2
53.8
3.3
4.2
61.4
80.5
FY2013
131,978
36,055
8,952
9,475
5,459
2,401
7,878
(5,477)
(3,025)
145,903
119,887
116
71.65
1,573.35
37.50
6.6
4.6
82.2
52.3
107.8
126.5
36.4
55.1
114.4
124.2
40.7
50.4
102.1
124.2
39.8
61.9
88.3
125.1
44.0
80.8
83.8
113.8
45.7
75.7
FY2018
160,422
50,720
5,895
6,699
3,579
14,019
10,370
3,649
(7,196)
170,875
100,143
20,913
57.28
1,612.59
56.5
3.9
3.5
58.0
98.6
76.0
114.9
49.9
88.8
Medium-Term Business Plan (2014–2016) “Next Stage Plan G” Medium-Term Business Plan (2017–2019) “PLG 2019”
• Established logistics centers, offices, showrooms and other facilities; revised and enhanced organizational systems and rules
• Strengthened product development, alliance with suppliers, organizational structure, construction work, branding and other areas
• Established a subsidiary in China and acquired U.S. company Koroseal
• Formulated brand concept, “Joy of Design”• Opened Interior Design Archive
• Introduce new SAP mission-critical system• Logistics system for West Japan• Enhance capabilities and raise employee awareness
• Develop a consolidated management system• Enhance profitability of overseas businesses
FY2014
Restructure our business strategy
Ten-Year Consolidated Financial Summary
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54 55SANGETSU REPORT 2019 SANGETSU REPORT 2019
Company Outline (as of March 31, 2019) Of�ces
Sangetsu Corporation and its consolidated subsidiaries
April 1, 2018 to March 31, 2019(includes some activities after the reporting period)
August 2019
Scope of Reporting Organizations
Period Covered
Date of Publication
Editorial Policy Note on Forward-looking Statements
The Sangetsu Report contains the current plans, outlook and strategies of Sangetsu Corporation including information that is not historical fact but forecasts of future business performance, representing assumptions and judgment based on the information currently available. Readers are therefore cautioned to refrain from relying completely on these forecasts alone. Actual business performance may differ from these forecasts due to the prevailing economic environment surrounding the Company and to �uctuations in demand and foreign exchange rates. Furthermore, the Sangetsu Report is not intended to promote investment. The Company assumes no responsibility whatsoever for any damage caused by the use of this information. Please keep in mind that any investment decisions must be based on your own judgment.
Name of ShareholderNumber of Shares Held
Percentage ofOwnership
4,090,900 6.65
The Master Trust Bank of Japan, Ltd. (Trust Account) 3,517,100 5.72
NORTHERN TRUST CO. (AVFC) RE U.S. TAXEXEMPTED PENSION FUNDS
2,151,500 3.49
MUFG Bank, Ltd.
2,128,800 3.46
The Ogaki Kyoritsu Bank, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account)
2,082,700 3.38
2,064,372 3.35
Yuichi Hibi 1,885,154 3.06
Touzo Hibi 1,863,492 3.03
1,780,640 2.89
Yoshio Hibi
Masae Miwa
1,780,000 2.89
Fiscal Year April 1 to March 31 of the following year
Record Date for DividendPayment
Year-end: March 31Interim: September 30
Annual General Shareholders’Meeting June
Mitsubishi UFJ Trust and Banking CorporationContact:7-10-11, Higashisuna, Koto-ku, Tokyo 137-8081Transfer Agent Department, Mitsubishi UFJ Trust andBanking CorporationTel: 0120-232-711 (toll-free in Japan)
Method of Public Notice
URL: https://www.sangetsu.co.jp/In the event that an electronic public notice cannot beposted due to accidents or circumstances beyond thecompany’s control, the notice will be placed in the NihonKeizai Shimbun newspaper.
4,000
2,000
0
2,400
2,050
1,700
(Thousandshares)
(FY)2018/1 2019/1
Principal Shareholders (as of March 31, 2019)
Status of Principal Shareholders (as of March 31, 2019)
Stock Information
Stock Price and Trading Volume
Sangetsu Report 2019 was published as an integrated report providing both �nancial and non-�nancial information so that key stakeholders can more clearly understand Sangetsu’s corporate value and medium- to long-term growth potential.
Sangetsu Corporation
April 21, 1953(founded around 1849, during the Edo Period)
Shosuke Yasuda
1-4-1 Habashita, Nishi-ku, Nagoya, Aichi451-8575, Japan
¥13,616 million
¥160.4 billion (consolidated)
2,334 (consolidated)
Planning, development and sales of interior decorating products, including wallcoverings, �ooring materials, curtains and upholstery
First sections of the Tokyo and Nagoya Stock Exchanges(Code: 8130)
Company Name
Date of Establishment
President and CEO
Address
Capital
Net Sales
Number of Employees
Main Business
Stock ExchangeListings
Headquarters
Branch Of�ces
Branches and Sales Of�ces
Consolidated Subsidiaries
Equity Method Af�liate
290,000,000
62,850,000
4,234
Total Number of Authorized Shares
Total Number of Shares Issued and Outstanding
Number of Shareholders
Nagoya
Hokkaido, Tohoku, Kita-Kanto, Tokyo, Chubu, Kansai, Chugoku-Shikoku, Kyushu
Kita-Tohoku, Fukushima, Higashi-Kanto, Tama, Yokohama,Atsugi, Maebashi, Utsunomiya, Niigata, Mito, Nagano, Gifu, Okazaki, Hokuriku, Shizuoka, Kyoto, Kobe, Higashi-Osaka, Minami-Osaka, Okayama, Shikoku, Kita-Kyushu, Kumamoto, Minami-Kyushu and other locations
DomesticSungreen Co., Ltd., Fairtone Co., Ltd., Sangetsu Vosne Corporation, Sangetsu Okinawa Co., Ltd.
OverseasKoroseal Interior Products Holdings, Inc., Goodrich Global Holdings Pte., Ltd., Sangetsu (Shanghai) Corporation
Wavelock Holdings Co., Ltd.
NORTHERN TRUST CO. (AVFC) RESILCHESTER INTERNATIONAL INVESTORSINTERNATIONAL VALUE EQUITY TRUST
Shareholder RegistryAdministrator and AccountManagement Institution forSpecial Accounts
* Address changes, requests for buy back of fractional shares and other services are in principle handled by the institutions managing shareholder accounts, such as brokerages. Shareholders should direct their inquiries to the brokerage or other institution managing their accounts. Note that the shareholder registry administrator (Mitsubishi UFJ Trust and Banking Corporation) cannot handle these requests.
* Inquiries concerning various services related to shares registered in special accounts should be directed to Mitsubishi UFJ Trust and Banking Corporation, which is the institution managing the accounts. Mitsubishi UFJ Trust and Banking Corporation will also accept inquiries at its branch of�ces throughout Japan.
* Unpaid dividends will be paid out by the head of�ce and local branches of Mitsubishi UFJ Trust and Banking Corporation.
Notes:• Sangetsu owns 1,371,532 shares of treasury stock but does not include itself in
the list of principal shareholders.• Percentage of ownership is calculated after deducting treasury stock. 2017/5
SANGETSU ShinagawaShowroom
Shinagawa Grand Central Tower 4F, 2-16-4Konan, Minato-ku, Tokyo 108-0075, JapanTel: +81-570-055-134Fax: +81-3-5463-6744
SANGETSU NagoyaShowroom
1-4-1 Habashita, Nishi-ku,Nagoya City, Aichi 451-8575, JapanTel: +81-570-055-135Fax: +81-52-564-3229
SANGETSU SendaiShowroom
98-1, Rokuchonome-Minami,Wakabayashi-ku,Sendai City, Miyagi 984-0031,JapanTel: +81-22-287-3922Fax: +81-22-253-6806
SANGETSU HiroshimaShowroom
2-28 Funairinakamachi, Naka-ku,Hiroshima City, Hiroshima 730-0842,JapanTel: +81-82-233-3815Fax: +81-82-233-3501
SANGETSU OkinawaShowroom
LEQUIOS SQUARE UCHIDOMARI 2F,215 Ojana, Ginowan City, Okinawa 901-2225, JapanTel: +81-570-055-138Fax: +81-98-890-3789
SANGETSU KanazawaShowroom
2-101 Otomo, Kanazawa City,Ishikawa 920-8205, JapanTel: +81-76-238-1411Fax: +81-76-238-1412
SANGESU OsakaShowroom
HERBIS OSAKA 4F, 2-5-25 Umeda, Kita-ku,Osaka City, Osaka 530-0001, JapanTel: +81-570-055-136Fax: +81-6-6347-9811
SANGETSU FukuokaShowroom
1-11-11 Higashinaka, Hakata-ku,Fukuoka City, Fukuoka 812-0892, JapanTel: +81-570-055-137Fax: +81-92-441-9503
Corporate Profile Sangetsu Showrooms
Stock Information
SANGETSU Shinagawa Showroom
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56 57SANGETSU REPORT 2019 SANGETSU REPORT 2019